Annual Report of the Jenoptik Group Lasers & Material Processing | Optical Systems | Industrial Metrology | Traffic Solutions | Defense & Civil Systems

Annual Report of the Jenoptik Group Lasers & Material Processing | Optical systems | industrial metrology | traffic solutions | defense & civil systems

Index of keywords A – Z Content

Dates 2011 Investor Relations

March 24, 2011 Katrin Fleischer

Segment reporting 79 ff. Publication of the Annual Report Phone + 49 (0) 3641 / 65-2290 A F N >> Shareholders´ equity 69, 74 f., 117 2010 Fax + 49 (0) 3641 / 65-2804 2 Information for the 121 notes to the consolidated Accounting and Financial assets 71, 145 Net asset position 73 ff. Shareholders´ structure 33 E-Mail: [email protected]

sharEholders financial statements e

consolidation principles 121 ff., 128 Financial calendar 2011 U8 Notes 121 ff. Shareholdings 38, 45, 81 f., 90, 94 c Accounting policies 69, 119, 120 Financial instruments 165 ff. Share master data 33 May 13, 2011 2 foreword of the Executive Board 121 details of the Group structure lan Adjusted result 56 Financial liabilities 68 ff., 162 ff. O Share price development 33 G Publication of the Interim Report Public Relations a

Assets 73 ff., 143 ff. Financial position 68 ff. Shares 32 f., 43, 147, 157 5 report of the Supervisory Board 127 Accounting policies st at Asset position 50 ff. Financial statements 115 ff. Operating income / EBIT 108, 133 Social commitment 67 1 quarter 2011 Auditor´s report 178 Forecast report 109 ff. Opportunities and Statement of movements in 12 corporate Governance Declaration 138 historical summary of financial data Katrin Lauterbach Acquisitions of sales 76 Foreword 3 risk report 89 ff. shareholders´ equity 118 f. Corporate Governance 140 segment reporting Further training 61 ff., 107 Options 44, 98 f., 164 Statement of June 8, 2011 Phone + 49 (0) 3641 / 65-2255 JENOPTIK B Order intake / backlog 56 f., 111 f. comprehensive income 116, 143 General Meeting of JENOPTIK AG 2011 Fax + 49 (0) 3641 / 65-2484 19 Improving the quality of our lives – 143 notes to the statement of comprehensive income Order situation 56 Strategy 46 f., 77 Improving the quality of our lives G E-Mail: [email protected] State-of-the-art technology is our contribution 148 notes to the balance sheet Balance sheet 73 ff., 117 Organization 7, 40, 45, 61, 96 Subsidiaries 123 ff. Borrowed capital 69, 138 Glossary 182 f. Other operating Supervisory Board 5, 174 ff. August 11, 2011 30 2010 in review 165 other notes Business areas 36 Group structure 36 expenses 58, 116, 144 Sustainability report 65 ff. S tate-of-the-art technology is our contribution Publication of the Semi Annual Report 2011 Business development 109 f. Outlook 106 ff. 32 the Jenoptik share 171 obligatory and supplementary disclosures under HGB Balance sheet, notes 148 f. H Overall economic situation 48 f., 103 f. T 172 german Corporate Governance Code November 9, 2011 C Historical summary of P Tangible assets 70 f., 73, 129, 150 ff. 35 group Management Report 172 executive Board Financial data 138 f. Targets and strategy 46 f. Publication of the Interim Report 174 supervisory Board Capital expenditure 59, 70 f., 113 Pensions 135, 158, 173 Training 62 f., 77 3rd quarter 2011 www.jenoptik.com ANNUAL REPORT 2010 36 Business and framework conditions Capital increase 72, 118, 156 I Pension Trust 155, 158 177 responsibility statement by management Cash flow statement 120, 164 f. Personnel expenses 62, 69, V 53 earnings, financial and asset position Cash flow 53, 71 f. Income statement, Notes 116, 143 139, 171 79 segment reporting Change of control 42, 45, 75 Innovations 59, 80 Personnel ratio 61, 139 Value added 68 f. 178 Auditors‘ report Chronicle 30 f. Intangible assets 70 f., 128 f., 148 Post-balance sheet events 89 89 report on post-balance sheet events Consolidated companies 117 f., 148 ff. Interest result 56, 145 Procurement 67, 96 f. W 89 risk report Contingent liabilities 169 Inventories 74, 154 Products 36 f., 66, 81 ff., 106 179 Additional Information Continuing business divisions 116 Investment result 56, 116, 144 Provisions 75, 135 f., 159 Working capital 71 f., 74, 120 103 forecast report Corporate Governance 9, 13 ff. Investor Relations 32 f. 180 executive Management Board Currency translations 127 Q K 115 consolidated financial 181 scientific advisory council D Quality management 64 Key figures by business division 46 statements 182 financial glossary Declaration of Key figures by region 141 R 184 Imprint Corporate Governance 12 ff. 116 consolidated statement of comprehensive income Defence & Civil Systems 86 ff. L Real estate 65, 73, 98 f., selected subsidiaries Depreciation 55, 70 f., 120 112 f.,151, 168 f. 117 consolidated balance sheet key figures of Jenoptik Details of structure 113 Lasers & Optical Systems 79 ff. Remuneration 40 ff., 161 f. 118 consolidated statement of movements Directive on Takeover Bids 43 ff. Leasing 69 f., 130, 152 f. Report of the Supervisory Board 5 f. Index of key words Distribution 143 Letter to the shareholders 3 Research & Development 59 f., 143 in shareholders‘ equity Divisions 38 f. Liabilities 68 ff., 117, 162 f. Reserves 75, 135 f., 158 dates and contacts >> Cover backside Liquidity position 71 Risk management system 89 ff. 120 consolidated statement of cash flows E Locations 38 ff. Risk report 89 ff. Responsibility statement Earnings (EBIT) 56, 116, 147 M by management 177 Earnings position 54 Employees 40 f., 61 f., 77, 112, 139 Management report 35 ff. S Environmental management 65 Management trainees 62, 107 Executive Board 2 Markets 38 f., 54, 109 f. Sales forecast 2011 111 Executive Management Material costs, Scientific Advisory Board 181 Board 40, 90, 180 materials ratio 139, 174 Sectors 38, 49 ff., 93 f., 104 f. Earnings per share 56, 116, 147 Metrology segment 83 ff., 133 Segments 36, 55, 79 ff. JENOPTIK ANNUAL | Group REPORT 2010 what was WHO WE ARE

Key Figures of JENOPTIK Jenoptik AG Selected Investment Companies (as at February 2011) key figures of jenoptik

2010 2009 Continuing (in million euros) business divisions Group Group Change in % 100 % ESW GmbH 100 % JENOPTIK North America, Inc. Sales 478.8 510.6 473.6 7.8 Executive Board Germany, Wedel USA, Delaware (Florida) of which Lasers & Optical Systems 188.9 188.9 166.7 13.3 2010 2009 Metrology 113.8 113.8 96.0 18.5 Continuing Corporate Center 50 % HILLOS GmbH 100 % JENOPTIK Optical Systems GmbH Defense & Civil Systems 173.9 205.8 205.3 0.2 (in million euros) business divisions Group Group Change in % Germany, Jena Germany, Jena Others 1) 2.2 2.1 5.6 – 62.5 Sales 478.8 510.6 473.6 7.8 EBITDA 60.1 88.7 23.4 279.1 Lasers & Material Optical Systems Industrial Metrology Traffic Solutions Defense & Civil Domestic 199.1 205.3 202.0 1.6 of which Lasers & Optical Systems 24.0 24.0 3.9 515.4 Processing Systems 100 % Hommel-Etamic GmbH 100 % JENOPTIK Optical Systems, Inc. Foreign 279.7 305.3 271.6 12.4 Metrology 12.1 12.1 – 8.5 ++ Germany, Villingen-Schwenningen USA, Jupiter (Florida) EBITDA (operative) 57.7 61.8 43.1 43.4 Leading provider of laser tech- Leading global provider of Leading manufacturer of high- One of the leading suppliers of The focus areas are military and Defense & Civil Systems 14.9 19.0 19.6 – 3.1 Others 1) 9.1 33.6 8.4 300.0 EBITDA 60.1 88.7 23.4 279.1 nology, specializing in diode precision optics and optical precision contact and non- components and systems for civil vehicle, rail and aircraft lasers and innovative solid-state systems designed to meet the contact metrology systems. greater worldwide road traffic equipment, drive and stabiliza- 100 % HOMMEL-ETAMIC America Corp. 100 % JENOPTIK Polymer Systems GmbH EBIT 29.0 56.4 – 19.6 ++ EBIT (operative) 29.0 31.9 7.8 309.0 lasers, e. g. thin-disk and fiber most stringent demands in The division has many years of safety. The product portfolio tion technology and energy sys- USA, Rochester Hills (MI) Germany, Triptis of which Lasers & Optical Systems 13.3 13.3 – 16.5 ++ EBIT 29.0 56.4 – 19.6 ++ lasers. terms of quality. expertise in the development of includes speed measurement tems as well as laser distance Metrology 8.6 8.6 – 14.6 ++ 1) The division has control of The division is design, develop- tactile, optical and pneumatic and red light monitoring sys- and infrared sensor systems. EBIT margin 6.1 % 11.0 % Defense & Civil Systems 8.6 11.5 12.2 – 5.7 the entire value-added chain ment and production partner measuring techniques as well tems as well as OEM products Opto-electronic instruments 100 % Hommel-Etamic France SA 100 % JENOPTIK Robot GmbH Earnings before tax 15.0 42.5 – 34.3 ++ Others 1) – 1.5 23.0 – 0.7 ++ (semiconductor material, laser for optical, micro-optical and as in the realization of customer and systems for detection of and systems for the security France, Bayeux Cedex Germany, Monheim 2) Earnings after tax 9.0 36.4 – 33.9 ++ sources, laser systems, system optical coating components, applications in-process, post- other traffic violations. In the industry as well as software, EBIT margin (EBIT in % of sales) 6.1 % 11.0 % Free cash flow (before income taxes) 31.6 32.9 41.0 – 19.8 and automation technology for opto-mechanical assemblies, process or in the metrology field of service, every aspect measurement and control tech- of which Lasers & Optical Systems 7.0 % 7.0 % entire production facilities). modules and systems, made of room. of the accompanying process nology complement the spec- 100 % Hommel-Movomatic Suisse SA 100 % JENOPTIK SSC GmbH Metrology 7.6 % 7.6 % Investments in tangible and intangible assets 14.5 15.3 14.4 6.3 glass, crystals as well as plastics. chain is covered. trum. Switzerland, Peseux Germany, Jena Defense & Civil Systems 5.0 % 5.6 % 5.9 % Order intake 534.6 582.5 432.8 34.6 R + D output 46.1 51.4 51.5 – 0.2 100 % JENOPTIK Automatisierungstechnik GmbH 50 % JT Optical Engine GmbH + Co. KG of which Lasers & Optical Systems 17.5 17.5 22.0 – 20.5 Germany, Jena Germany, Jena Metrology 12.4 12.4 11.9 4.2 31.12.2010 31.12.2009 Change in % Defense & Civil Systems 16.2 21.5 18.0 19.4 Group / (compared to Others 1) 0.0 0.0 – 0.4 ++ Continuing Group previous year 100 % JENOPTIK Diode Lab GmbH 100 % Lechmotoren GmbH (in million euros) business divisions Group without Optronik without Optronik) Order intake 534.6 582.5 432.8 34.6 Germany, Berlin Germany, Altenstadt Order backlog 355.4 339.4 304.0 16.9 of which Lasers & Optical Systems 230.2 230.2 168.4 36.7 Employees 2,951 3,268 3,138 – 6.0 Metrology 137.0 137.0 83.2 64.7 66.58 % JENOPTIK Japan Co. Ltd. 1) 100 % Multanova AG Defense & Civil Systems 163.7 211.6 178.0 18.9 Japan, Yokohama City (Kanagawa) Switzerland, Uster 1) 1) EBIT in % of sales Others 3.7 3.7 3.2 15.6 2) The tax burden of the continuing business divisions includes the taxes related to the discontinued business division. EBIT, EBITDA and EBIT margin cannot be compared with last year's figures because they do not include Group charges. shared services 66.60 % JENOPTIK Korea Corp. Ltd. 1) 100 % PHOTONIC SENSE GmbH 31.12.2010 31.12.2009 Change in % Korea, Pyeongtaek Germany, Eisenach Group / (compared to Continuing Group previous year (in million euros) business divisions Group without Optronik without Optronik) 100 % JENOPTIK Laser GmbH Order backlog 355.4 339.4 304.0 16.9 Germany, Jena of which Lasers & Optical Systems 98.8 59.9 59.9 64.9 Metrology 45.1 21.9 21.9 105.9 Defense & Civil Systems 212.6 260.2 224.8 – 5.4 Others 1) – 1.1 – 2.6 – 2.6 57.7 Employees 2,951 3,268 3,138 – 6.0 of which Lasers & Optical Systems 1,234 1,284 1,284 – 3.9 Metrology 632 769 769 – 17.8 Defense & Civil Systems 931 1,077 947 – 1.7 Others 1) 154 138 138 11.6

Key Figures of JENOPTIK Jenoptik AG Selected Investment Companies (as at February 2011) key figures of jenoptik

The above mentioned investment companies are not necessarily direct shareholdings of JENOPTIK AG. 1) “Others“ include holding, real estate, consolidation. 1) not consolidated EBIT, EBITDA and EBIT margin cannot be compared with last year’s figures. vel d s anattractive, globalhigh-tech “ consistent actions,our our customersthankstorapid and partner creating addedvaluefor enjoys sustainedfinancialsuccess. A e o p ed by by ed t h e e E x ecu t i v e M e a nag e m Whe e n r t e

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Group management re o INFORMATIONprt for the shareholders Foreword of the Executive Board INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information

Froro ew d of the Executive Board s r lde o eh ar he sh t For Jenoptik, 2010 was a successful fiscal year. The economy in general and the Jenoptik Group’s eco- for nomic segments in particular all recovered much more rapidly than we had previously expected. The significant rise in semiconductor industry demand, which had begun in the nd2 half of 2009, continued at a constant rate or even faster in the course of 2010. We also benefited from the rapid recovery of INFORMATION INFORMATION the automotive industry and connected supplier segments that began in spring 2010. rt o p e r

Thanks to the commitment of our employees, improved processes and an attractive range of products t n e

we were able to match rapidly increasing demand. Order intake rose by just under 35 percent to m e 582.5 million euros, including several major orders, some of which will contribute to sales figures far

into the future, and others which have already had their full effect on this past year’s figures. m u r Our sales rose to 510.6 million euros, while the Group’s operating profit came to 56.4 million euros. G o anag p This included positive one-off effects, particularly from the sale of Jena-Optronik GmbH. The purely operational EBIT was 31.9 million euros. It is of particular significance that, in addition to the general economic recovery, this also bore out the efficacy of our optimized cost structures. The restructuring measures implemented in 2009 and the continuation of the Jenoptik Excellence Program could both be seen to pay off handsomely in 2010.

In our sale of Jena-Optronik GmbH, we were able to seize a favorable moment during the consolidation phase of the aerospace market. This type of sale decision must always reflect the careful consideration of opportunities for all parties involved. In this case, Jena-Optronik GmbH’s new owners will be able to ensure their further growth better than we could. For us, the revenue from the sale strengthened our financial foundations and will now be available to finance our further growth.

Our net debt was cut in half from the end of 2009, dropping to 79.3 million euros. This was made possible by the sale of our aerospace business, by the capital increase implemented in March 2010, and by the sale of the remaining shares in a non-strategic investment. Thanks to our steadfast working capital management scheme, we were also able to ensure continuously positive cash flows over the past two years.

As you can see, the Jenoptik Group’s economic situation has improved on a sustainable basis in 2010. And the details presented in this Annual Report do much to illustrate this. This was also reflected in the rise in the Jenoptik share price over the past several months. And at this juncture, we would like to take the opportunity to thank you for the trust you have placed in Jenoptik.

JOI EN PT K 2010 3 INFORMATION for the shareholders Foreword of the Executive Board

We would particularly like to thank our employees for their great commitment to the company. In the aftermath of the crisis in 2009, it was quite an achievement to carry out the projects necessary to move Jenoptik forward while meeting the strong increase in demand.

We have made considerable progress in the strategic development of Jenoptik over the past two years, all in the face of challenging economic conditions. And we are quite proud of these achievements. It is, however, important for us to underscore our commitment to working hard on the further development of Jenoptik in the current fiscal year as well. We have not yet reached our medium to long-term corporate goals, and the financial crisis has set us back around two years in this regard. We will, nevertheless, continue to pursue our goal of one billion euros in sales as well as an EBIT margin of between 9 and 10 percent.

Our growth outlook is currently quite favorable, both in terms of our company and in terms of the economy at large. As of early 2011, we are able to report a positive general economic environment, as all our chief segments continue to develop well. And yet, politicians and the participants in the financial, resource, and capital markets remain nervous. The Arab world is currently in a state of political upheaval. It has therefore become all the more difficult to make reasonably certain predictions on the development of the economy and of our markets.

On the whole, however, we can look forward with optimism to the current and following fiscal years. We will continue to work to profit from the German export boom. We will continue further along our internationalization course, especially in North America and Asia, regions of particular importance to us. Numerous projects are also underway in all parts of the company aimed at lasting improvements in our cost structures and our internal processes. This, along with an excellent order intake in 2010, will all serve to support us toward achieving our planned sales goals and toward improving our Group EBIT at an even faster pace than our sales.

Sincerely,

Michael Mertin Frank Einhellinger

Jena, March 2011

4 JOI EN PT K 2010 Report of the Supervisory Board INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information

S upervisory Board Report s r lde o eh ar he sh t Jenoptik was able to overcome the strong effects of the global financial and economic crisis in fiscal for year 2009 to reemerge with a very successful reporting period 2010. Particular success was attained in terms of the continued strong reduction of the net debt and the general improvement of the Group’s earnings and financial position. INFORMATION INFORMATION rt

During this past fiscal year, the Supervisory Board carefully fulfilled its legally and contractually o p e r

stipulated tasks, regularly advising the Executive Board in its management of the Group, and continu- t n e

ally supervising its activities. The Executive Board involved the Supervisory Board intensively and m e at an early date in all decisions of fundamental importance to the company. To this end, the Supervi-

sory Board was regularly provided with timely and comprehensive information by the Executive Board, m both orally and in written form, on the current economic situation of the company and Group, u r business developments, risk situation including risk management, relevant compliance matters, and cor- G o anag p porate planning and strategy. Business processes of importance to the company were discussed both in committee meetings and in plenary Supervisory Board meetings on the basis of reports provided by the Executive Board. The Group’s financial and risk situations, including its risk management, were a particular focus of the Supervisory Board in 2010. The Executive Board provided the Supervisory Board with regular information on divergences in the company’s business from its plans and goals, with detailed explanations of such cases. The reporting obligations stipulated in the German Stock Cor poration Act (§ 90 AktG) and the German Corporate Governance Code were fulfilled in full.

The Supervisory Board approved of transactions that required its authorization, as submitted with comprehensive information by the Executive Board in accordance with legal regulations, the articles of association, and the Executive Board rules of procedure. This included in particular a 10-percent capital increase, the sale of shares in caverion GmbH and the sale of Jena-Optronik GmbH. The Super- visory Board met in fiscal year 2010 for four regular sessions, attended also by the members of the Executive Board. Two resolutions were passed through circular procedure. No member of the Supervi- sory Board attended less than half of the meetings, with an average attendance of 94 percent.

JOI EN PT K 2010 5 INFORMATION for the shareholders Report of the Supervisory Board

The Chairman of the Supervisory Board and the committee chairmen also maintained regular contact with the Executive Board in the times between there plenary or committee meetings. The Chairman of the Supervisory Board was kept particularly up-to-date on the current development and events involving the company’s state of business. Each member of the Supervisory Board also received regular detailed monthly reports on the state of the company. The Supervisory Board met with the Executive Board and other representatives of the top management at a separate strategy session in December to discuss the company’s strategic positioning with regard to the latest trends, potential areas of growth, and the company’s middle-term planning of individual areas of business – all in depth and taking the perspectives of markets, competition, and customers into consideration. The collaboration between the Executive Board and Supervisory Board was characterized by a continually open and trusting atmosphere.

Particular subjects discussed by the Supervisory Board The Executive Board reports on the state of business, and the current sales and earnings development in particular, the risk situation, and current financial position were all matters of regular discussion in meetings. The Supervisory Board also repeatedly discussed the Jenoptik Excellence Program, into which have been integrated a large number of cost-cutting and optimization measures group-wide.

At its meeting of March 29, 2010, the Supervisory Board, together with two auditor representatives, worked in particular on the audit of the JENOPTIK AG annual financial statements, the consolidated financial statements, and the management report, group management report, and annual report for fiscal year 2009, and in particular with the corporate governance statement including the corporate governance report. The annual financial statements of JENOPTIK AG and the consolidated financial statements were approved, the annual financial statements were thus adopted. The meeting also focused on passing the agenda for the annual general meeting on June 9, 2010. The Supervisory Board was, moreover, informed in detail on the capital increase measure, which was decided and implemented in March 2010 by the Executive Board and the capital market committee of the Supervisory Board, on the updated group code of conduct, and on the state of the company’s real estate portfolio. The Supervisory Board also decided on the key features for assessment of the 2009 target agreement of the Executive Board members.

At its June 8, 2010 meeting, the Supervisory Board reported on the Group’s current business and financial position since the conclusion of the 1st quarter. The Supervisory Board adopted its revised and updated rules of procedure and approved changes in the Executive Board rules of procedure as well. The Board also approved the sale of the JENOPTIK AG 15.1-percent interest in the share capital of caverion GmbH, Stuttgart, to YTI GmbH. Following intensive discussion, the Supervisory Board

6 JOI EN PT K 2010 Report of the Supervisory Board INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

decided to amend the Executive Board contracts including an adaptation of its remuneration system to r lde

the Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit o AG eh der Vorstandsvergütung, Vorst ). The Board also decided that it, along with the Executive Board, ar would be subject to the payment of deductibles on their D & O insurance, effective January 1, 2011, in he sh t accordance with the requirements of the German Corporate Governance Code (Point 3.8, para. 3). for

In July 2010, the target agreements for the remuneration of the members of the Executive Board were established for fiscal year 2010 through circular procedure. This was done on the basis of revised Exec- INFORMATION INFORMATION utive Board contracts and the recommendations of the personnel committee. rt o p e r

The Executive Board reported, at a September 8, 2010 meeting, on the current Group business and t n e

financial position, taking into account the half-year financial statements and the July 31, 2010 monthly m e report. The Executive Board also informed the Supervisory Board on the completion of the sale of

JENOPTIK AG’s shares in caverion GmbH and the connected termination of the financing agreement m with that company. The Supervisory Board also discussed the changes introduced by the government u r commission to the German Corporate Governance Code in the version dated May 26, 2010 and the G o anag p introduction of a secure electronic data room to improve the exchange of information with and among the members of the Supervisory Board.

Through yet another circular procedure in early October 2010, the Supervisory Board agreed to the sale of all JENOPTIK AG shares in Jena-Optronik GmbH to Astrium GmbH. Plans for the sale had already been discussed in detail at the September 8, 2010 meeting.

At its final meeting of the reporting year on December 9, 2010, the Supervisory Board focused on the comprehensive information provided by the Executive Board on the Group business and financial position following the conclusion of the 3rd quarter and on planning for fiscal year 2011. In accordance with the new recommendation of the German Corporate Governance Code (Point 5.4.1 para. 2), the Supervisory Board established specific goals for its own future composition, and, together with the Executive Board and following the examination of a corporate governance checklist, approved the declaration of conformity in accordance with Section 161 of the Stock Corporation Act. The Supervisory Board also evaluated and discussed the results of an efficiency test carried out by the Board using a questionnaire. Upon the recommendation of the Audit Committee and in accordance with the decision of the Annual General Meeting of June 9, 2010, the Board nominated KPMG AG Wirtschaftsprü- fungsgesellschaft of Berlin as the auditor and group auditor of the 2010 financial statements and consolidated financial statements. The Executive Board also informed the Supervisory Board of changes in the investment portfolio and of new developments in the risk management and internal control systems.

JOI EN PT K 2010 7 INFORMATION for the shareholders Report of the Supervisory Board

Wrkn o i the committees The Supervisory Board has formed a total of five committees, which, if legally permissible, make decisions on behalf of the plenary board, and which otherwise prepare topics to be discussed at plenary sessions, thus contributing to Board efficiency. The committee chairmen presented the content and results of their committee’s meetings in detail at the subsequent plenary meetings of the Supervisory Board. The composition of the individual committees is provided on pages 174 / 175 of the Annual Report.

The Audit Committee, led by Mag. Heinrich Reimitz, met four times in fiscal year 2010. The meetings were attended by the CFO, and the first of the year’s meetings by two auditor representatives as well. In accordance with the legal provisions, at least one independent member of the Audit Committee must be well versed in accounting or auditing. The Committee worked intensively on the evaluation of the annual financial statements and consolidated financial statements, the management and group management reports, and on the discussion of the detailed quarterly and half-year reports before their publication. The Audit Committee continued to focus on the effectiveness and further development of the risk management system, the internal control system, and current topics involving internal audit and compliance. The Audit Committee recommended to the Supervisory Board at its March 2010 meeting that KPMG AG Wirtschaftsprüfungsgesellschaft of Berlin be suggested as the auditor in 2010 to the Annual General Meeting on June 9, 2010. To reach this conclusion, the Committee closely examined the independence and qualifications of the auditor and the other services that the auditor provided the previous fiscal year. In May 2010, the Audit Committee looked closely into the group risk report and the revised group-wide risk management guidelines along with the updated code of conduct and compliance guidelines. Discussions in August 2010 centered again on the new group risk report, establishing points of focus for the auditing of the 2010 consolidated financial statements and the examination of the group auditor’s management letter for 2009. It its final meeting of the year in November, the Audit Committee prepared the issuing of the audit mandate to the auditor, including a fee agreement, and submitted its recommendation to the plenary board. The meeting also focused on the results of the examinations by the internal audit and their audit plans for the coming fiscal year as well as the future development of the risk management system.

The Personnel Committee, which met four times this past year, is led by the Supervisory Board Chair- man Rudolf Humer. Among other things, the Committee prepares the Supervisory Board’s personnel decisions with regard to the employment contracts of the Executive Board members and met four times in the past fiscal year. Particular focus was placed on the Executive Board members’ target agreements and the changes to the Executive Board contracts, especially including changes to the remuneration system to comply with the Act on the Appropriateness of Management Board Remuneration (Gesetz zur Angemessenheit der Vorstandsvergütung, VorstAG). The Personnel Committee submitted its relevant recommendations to the plenary board.

8 JOI EN PT K 2010 Report of the Supervisory Board INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

The Nomination Committee, also led by the Supervisory Board Chairman Rudolf Humer, is composed r lde

of the three shareholder representatives on the Personnel Committee. Its task is to submit recommenda- o eh

tions to the Supervisory Board for suitable nominations to be made to the Annual General Meeting. ar No meetings were held in 2010 as there were no reasons to meet. he sh t

for The Capital Market Committee led by Dr. Lothar Meyer met three times in fiscal year 2010, twice as a telephone conference. The Capital Market Committee approved of measures to implement a capital increase and the connected change in the JENOPTIK AG Articles of Association, thus carrying out the INFORMATION INFORMATION powers granted it by the Supervisory Board with regard to capital increases in connection with the rt

utilization of the authorized capital. o p e r

t n e

The Mediation Committee formed in accordance with Sect. 27, para. 3 MitbestG did not need to con- m e vene in the past fiscal year. m

Corporate Governance u r The Supervisory Board again continually focused on the fundaments of good corporate governance in G o anag p 2010, delving intensively into the continuing changes to and the implementation of the German Corporate Governance Code at its September 8 and December 9, 2010 meetings. The Executive Board reports, on behalf of the Supervisory Board as well, on JENOPTIK AG corporate governance in its corporate governance report and its corporate governance declaration, all in accordance with Point 3.10 of the German Corporate Governance Code. This can be seen from page 12 of this Annual Report. Information on the principles of and changes in the Executive Board remuneration system can be viewed in the management report (from page 40) and the individual remuneration of the Supervi- sory Board and Executive Board members in the Notes (on pages 161 / 162 and from page 172).

Pursuant to the requirements of the German Corporate Governance Code, the Supervisory Board examined and approved of the efficiency of its own activities this past fiscal year. At its December 9, 2010 meeting, the Supervisory Board and the Executive Board decided to issue a declaration of conformity in accordance with the Stock Corporation Act (§ 161 AktG) with only one exception. As of January 1, 2011, JENOPTIK AG has fulfilled without exception all recommendations of the German Corporate Governance Code. The declaration of conformity including the reasoning for exceptions has been made permanently available to shareholders on the company website.

This past fiscal year, there were no conflicts of interest of Executive Board or Supervisory Board members that needed to be communicated to the Supervisory Board and reported to the Annual General Meeting.

JOI EN PT K 2010 9 INFORMATION for the shareholders Report of the Supervisory Board

An n ual and consolidated financial statements KMPG AG Wirtschaftsprüfungsgesellschaft, Berlin, audited the financial statements and the management report of JENOPTIK AG in accordance with HGB regulations, and the consolidated financial statements and management report, which were prepared in accordance with § 315a HGB and followed International Financial Reporting Standards (IFRS) accounting standards and which were submitted by the Executive Board. The auditors each gave their unqualified approval. At its December 9, 2010 meeting, the Supervisory Board gave the order for the audit in accordance with the resolution of the Annual General Meeting of June 9, 2010.

The auditor undertook the audit in accordance with the German principles of correct auditing established by the Institut der Wirtschaftsprüfer (IDW) as well as in accordance with the International Standards on Auditing (ISA). The audit reports were immediately sent out upon completion and intensively and comprehensively discussed along with the documents supplied by the Executive Board, both by the Audit Committee at its March 8, 2011 meeting and the plenary board’s meeting on March 23, 2011. At both meetings, the auditor reported on the chief results of his audit and was available for questions and further information. The Audit Committee chairman provided the plenary board with a comprehensive report on the Audit Committee’s examination of the annual and consolidated financial statements.

Following the conclusive results of the initial evaluation on the part of the Audit Committee, as well as the Supervisory Board’s own evaluation and discussion, the Supervisory Board had no reservations concerning the results of the audit at its March 23, 2011 meeting and approved the annual and consolidated financial statements submitted by the Executive Board. The annual financial statements were thus adopted in accordance with Sect. 172, para. 1 of the Stock Corporation Act (AktG).

Composition of the Executive Board and Supervisory Board The Executive Board remained unchanged in fiscal year 2010.

Effective November 30, 2010, the longstanding group works council chairman Günther Reissmann, the senior member of the Supervisory Board, left the Board as he entered retirement age and thus ended his active work with JENOPTIK AG. Upon the recommendation of the group works council, Dieter Kröhn was appointed by court order of the Jena District Court as member of the Supervisory Board through the end of the current Board’s term of office. The Supervisory Board expresses its appreciation to Günther Reissmann for his great efforts and contributions to the company and his commitment since its founding and for his 18 years of continual and committed membership on the Board.

10 JOI EN PT K 2010 Report of the Supervisory Board INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

With the completion of the sale of all shares in Jena-Optronik GmbH, Anita Knop left her position as r lde

an employee representative on the Supervisory Board. Christel Knobloch was also appointed by court o eh

order of the Jena District Court as member of the Supervisory Board through the end of the current ar board’s term of office. The Supervisory Board thanks Anita Knop for her excellent work and commit- he sh t ment to the company over the past years. for

At the December 8, 2010 meeting, Michael Ebenau was appointed to succeed Wolfgang Kehr as the deputy chairman of the Supervisory Board, effective January 1, 2011. Wolfgang Kehr left his office as INFORMATION INFORMATION he entered retirement age and thus ended his active tenure at IG Metall, effective December 31, 2010. rt

The Supervisory Board thanks Wolfgang Kehr for his great commitment as the deputy chairman of the o p e r

Supervisory Board since June 6, 2008. He will continue to serve as a JENOPTIK AG Supervisory Board t n e

member. m e

We would also like to thank the members of the Executive Board, all employees, and employee repre- m sentatives for their great personal efforts, just as we would like to extend our appreciation to our share- u r holders for the trust they have placed in us. G o anag p

Jena, March 2011 On behalf of the Supervisory Board

Rudolf Humer Chairman

JOI EN PT K 2010 11 INFORMATION for the shareholders Declaration of Corporate Governance

Corrat po e Governance Report Corporate Governance declaration

In this statement, the Executive Board submits its report – Declaration of conformity by the Executive in sections I and II.1 also on behalf of the Supervisory Board – Board and the Supervisory Board of in accordance with Point 3.10 of the German Corporate JENOPTIK AG in fiscal year 2010 concerning Governance Code in the version dated May 26, 2010, and in the Corporate Governance Code pursuant accordance with Sect. 289 a of the German HGB (German to Sect. 161 German Stock Corporation Act Commercial Code). (AktG) Under Sect. 161 of the German Stock Corporation Act (AktG) the Executive Board and the Supervisory Board of a stock-listed I. Declaration of conformity company are required to issue an annual declaration that the recommendations of the Government Commission on the It is the view of JOI EN PT K AG management that a responsible, German Corporate Governance Code as published by the Fed- values-oriented, and sustainably successful corporate policy eral Ministry of Justice in the official section of the Federal provides a major foundation for the long-term positive devel- Gazette (Bundesanzeiger) have been and are complied with or opment of the Group as a whole. Jenoptik’s sound corporate to advice which recommendations have not been or are not governance has indeed contributed significantly to overcoming applied and why not. the palpable ramifications of the global economic crisis for the company. The JOI EN PT K AG Executive and Supervisory Boards support the recommendations of the “Government Commission on the Jenoptik structures its policies to adhere to recognized German Corporate Governance Code” and state that pursuant standards, and supports the recommendations of the German to Sect. 161 German Stock Corporation Act: Corporate Governance Code (“Code”). The Executive and Supervisory Boards issued their joint declaration of conformity, I. The recommendations of the “Government Commission on in adherence with Section 161 of the Stock Corporation the German Corporate Governance Code” in the version Act on December 9, 2010, which is available on a permanent dated May 26, 2010 will be followed in full from January 1, basis along with those of the past several years at 2011. www.jenoptik.com under Investors / Corporate Governance. Since January 1, 2011 Jenoptik has, for the first time, fully II. since the last declaration of conformity dated December adhered to the recommendations of the German Corporate 2009 the recommendations of the “Government Commis- Governance Code in the version dated May 26, 2010. Jenoptik sion on the German Corporate Governance Code” have had previously followed the recommendations with one been followed and will be followed until December 31, exception. Jenoptik has thus implemented the adaptations to 2010 with the following exception: the Code of the past year. In addition to the recommendations of the Code, Jenoptik has also followed a majority of the other 1. A deductible for D & O insurance for members of the suggestions made in the Code. Supervisory Boards is waived (Point 3.8 Paragraph 3 of the German Corporate Governance Code). Jenoptik is convinced that transparent corporate management serves to boost trust in the Group on the part of investors, busi- Explanation of deviation to Point II. ness partners, employees, and the general public. This includes The Supervisory Board was of the opinion that the motivation the appropriate treatment of risks. We view our compliance and responsibility of the Supervisory Board members would not with both external and internal guidelines as a basis for respon- be improved through the introduction of a deductible. After sible action and as a major aspect of our business.

12 JOI EN PT K 2010 Declaration of Corporate Governance INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

discussing this topic again the Supervisory Board decided in the tee and the Supervisory Board of current opportunities and risks r lde

meeting on June 8, 2010 that the Supervisory Board will have and their development. Further detailed information on risk o eh

a deductible in accordance with Point 3.8 Paragraph 3 of the management including the significant characteristics of the ar German Corporate Governance Code with effect from internal control and risk management system with a view to he sh t January 1, 2011. Therefore, all recommendations of the Gov- the financial reporting process are explained in the risk report for ernment Commission on the German Corporate Governance of the Annual Report beginning from page 89. Code will be followed with effect from January 1, 2011. Transparency INFORMATION INFORMATION Jenoptik provides investors and the general public with com- rt

II. Details on management practices prehensive and up-to-date information which directly relate o p e r

to the company and are significant in the evaluation of its t n e

1. corporate Governance Report development. The annual and quarterly reports also provide m e Shareholders and Annual General Meeting comprehensive information on the Group’s earnings, financial

JOI EN PT K AG shareholders exercise their rights at the Annual and asset position. Soon after the publication of the reports, m General Meeting, which takes place at least once a year. Each telephone conferences are held with journalists, analysts, and u r share is accorded one vote. Shareholders can either participate investors. In addition to the annual balance sheet press confer- G o anag p directly in the Annual General Meeting or can do so by proxy, ence, analyst conferences are also held for the annual and for which they can either authorize a person of their choice or half-year financial figures. Press releases also cover important a proxy nominated by the company acting on their instructions. events and current developments. All documents and information on the Annual General Meeting will be made available on our Internet page (www.jenoptik.com) In accordance with law, inside information is published immedi- under Investors / Annual General Meeting for viewing or down- ately inasmuch as the Executive Board is not, in individual cases, load. This includes the agenda with proposed resolutions and exempted from this obligation. The Capital Market working the explanation of participation requirements, reports and doc- group evaluates, both regularly and for specific concerns, individ- uments necessary for the resolutions, information on share- ual circumstances with regard to their ad-hoc relevance in order holder rights, and any shareholder counter-motions or voting to ensure that potential inside information is treated in accor- recommendations to be published. The presence and voting dance with the law. All ad-hoc releases and press releases as well results will subsequently be published on this page. as the quarterly and annual reports are available in German and English on the company’s Internet site under Investors / Reports Risk management and Presentations. Comprehensive information is also presented Jenoptik also views its responsible treatment of the risks and on the website on Jenoptik shares and the Group as a whole. opportunities that arise from business activity as part of its good corpor ate governance. Jenoptik has a group-wide risk There is a group guideline on upholding the statutes of the management system that includes all companies, within Ger- Securities Trading Act and major obligations and responsibilities many and internationally, of which Jenoptik controls more that on the part of board members and employees concerning 50 percent. The current risk management system was exam- inside information, ad-hoc publicity, market manipulation and ined for its effectiveness this past fiscal year, and was optimized directors’ dealings. People who are authorized to have access and developed further with the help of external consulting. to inside information are included in an insider list. The Executive Board regularly informs both the Audit Commit-

JOI EN PT K 2010 13 INFORMATION for the shareholders Declaration of Corporate Governance

Information on major changes to the shareholder structure are are examined by auditors. Before they are published, they are provided at www.jenoptik.com under Investors / Share / Voting also examined by the Audit Committee and the Supervisory rights announcements, whenever it comes to our attention Board, and comprehensively discussed with the Executive that someone has reached, surpassed, or fallen below 3, 5, 10, Board. On June 9, 2010, the Annual General Meeting selected 15, 20, 25, 30, 50, or 75 percent of all JOI EN PT K AG voting KPG M AG Wirtschaftsprüfungsgesellschaft, Berlin to be the rights, whether due to purchases, sales, or other events. auditor for fiscal year 2010. The company agreed with the In fiscal year 2010, Jenoptik received two such reports from auditors that they would inform the Supervisory Board Chair- U niCredit Bank AG, Germany, and Templeton Investment man of any grounds for bias or disqualification as well as of all Counsel LLC., USA. In addition, we received announcements of important events and findings that emerge during the audit. VRIA S Vermögensverwaltungs GmbH, Ms. Wahl-Multerer and This includes occasions when the auditors should discover facts ZOOM Immobilien GmbH relating to transactions in 2010. that point to inaccuracies in the declaration of conformity submitted by the Executive Board and Supervisory Board in accor- Board member share deals dance with Sect. 161 AktG (German Stock Corporation Act). Share deals on the part of Executive and Supervisory Board members (directors’ dealings) in accordance with Section 15 a Prior to submitting the proposal for election to the Annual WpHG (German Securities Trading Act) are published at General Meeting, the Supervisory Board received a declaration www.jenoptik.com under Investors / Corporate Governance / of independence from the auditing firm, stating that there Directors’ Dealings. were no business, financial, personal or other relationships between KP MG AG Wirtschaftsprüfungsgesellschaft, Berlin, its As of December 31, 2010, the total of all Jenoptik shares held board members and head auditors, and the company and their by the Executive and Supervisory Board members, whether board members. KPG M AG also reported in its declaration of directly or indirectly, came to more than 1 percent of all shares independence on the degree to which it provided Jenoptik with issued by the company. The two Executive Board members other services over the past fiscal year, especially in the field of combined for 1,036 shares while the Supervisory Board mem- consulting, and which services have been contractually agreed bers held 3,729,473 shares in total, including 2,773,066 shares for the following year. It was also established that none of the indirectly held by Gabriele Wahl-Multerer as the sole share- auditors involved in the audit had exceeded the seven-year holder of Zoom Immobilien GmbH (as legal successor to VRIA S overall limit for the authorization of issuing unqualified audit Vermögensverwaltungs GmbH), and 675,000 shares held certificates. directly and indirectly by Rudolf Humer. Executive and Supervisory Boards Accounting and auditing The knowledge, talent, and relevant experience necessary in The consolidated financial statements and all interim consoli- carrying out the tasks involved are all taken into account in dated financial statements are compiled in accordance with the composition of the Supervisory Board, as well as board International Financial Reporting Standards (IFRS). The annual diversity and an adequate number of independent members. financial statements are compiled in accordance with the Two women are currently on the Supervisory Board and at least requirements of the German Commercial Code (Handelsgesetz- four members have considerable international experience. buch, HGB). The consolidated financial statements and the The broad mix of backgrounds ensures a diversity of expertise annual financial statements including the management reports as well on the Supervisory Board.

14 JOI EN PT K 2010 Declaration of Corporate Governance INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

The JOI EN PT K AG Supervisory Board announced the following In accordance with the recommendations of the German Cor- r lde

goals for its future composition at its December 9, 2010 porate Governance Code, information is to be published on o eh

meeting, in accordance with the new recommendation of the individual remuneration of members of the Executive Board ar Point 5.4.1 of the German Corporate Governance Code and and Supervisory Board, which can be found in the Notes from he sh t taking into account the object of the company, its size, and page 172. We view this information as an integral part of the for the international orientation of the Jenoptik Group. The Super- remuneration report and thus also of the corporate governance visory Board will then ensure that it continues to maintain a report. membership that particularly fulfills the needs of an interna- INFORMATION INFORMATION tional world, whether in terms of having a different citizenship 2. Other corporate management practices rt or experience in other countries. The Board will also make sure Over the past few years, JOI EN PT K AG has increasingly devel- o p e r

that its members do not have conflicts of interests involving oped from a financial holding company to a company that t n e

a consultancy position or board membership with customers, views itself as a “strategic architect”. Jenoptik’s operative busi- m e suppliers, creditors, or other JOI EN PT K AG business partners. ness is divided into segments, divisions, and business units.

In cases of major and non-temporary conflicts of interest, espe- The work of JOI EN PT K AG lies, in particular, in defining, imple- m cially when it comes to responsibility in companies that are in menting, and monitoring overarching processes as well as u r G o anag p direct competition with JOI EN PT K AG or a group company, the development and implementation of corporate strategy. the Supervisory Board will normally refrain from such a nomina- The Executive Board is supported in its strategic decisions tion. The Supervisory Board will also work to ensure that it has by the Executive Management Board, which includes both the at least two women. Candidates will also not be nominated Executive Board members and the heads of the five divisions who have already turned 70 by the time of the election. The alongside the head of HR, Supply Chain Management & Shared Supervisory Board will recommend candidates to the Annual Service Center of JOIAGEN PT K . The division heads continually General Meeting who are particularly outstanding and fulfill the provide up-to-date and comprehensive information on events criteria of expertise and personal integrity. The current compo- in their divisions that are relevant to the Group as a whole, par- sition of the Supervisory Board already corresponds with this ticularly within the framework of the monthly meetings of the vision, and is to remain so into the future. divisions with the Executive Board and selected JOI EN PT K AG Further information on the Executive Board and Supervisory department leaders. This past fiscal year also once again saw Board and on their approaches to management can be found central management meetings which numerous group manag- under point III of the Corporate Governance Statement. ers attended along with the Executive Management Board. In addition there was an exchange among those involved in the Remuneration Report innovation process, including employees of the RD & depart- The remuneration report describes the basic principles of the ments and from the product management, production, as well remuneration system for the Executive Board. It is part of the as distribution and marketing areas. Group-wide projects are Group Management Report beginning on page 40 of this supported by the central project office which monitors the Annual Report. Information on compensatory agreements development of 97 projects at present in a process developed with Executive Board members should it come to a change of for this. The rolling strategy process involves regular strategy control can be viewed on page 42. meetings with the divisions, which form a basis, focused on

JOI EN PT K 2010 15 INFORMATION for the shareholders Declaration of Corporate Governance

the markets and competition, for divisional planning for the turn to his or her supervisor, to the heads of internal audit or next year and in the middle term. The individual steps in terms central HR department, or to the works council. The code of of planning and strategy are discussed with the divisions at cer- conduct can be viewed at www.jenoptik.com under Investor tain predetermined points in time, with the results noted and Relations / Corporate Governance. activities planned. These are presented for approval to the Executive Board at autumn strategy and planning meetings. In addition to these general guidelines on ensuring that all employees act in a legally compliant manner, Jenoptik has Jenoptik regularly supports a number of charitable projects, developed a specific system of values through its own internal organizations, and initiatives in order to bolster the develop- group guidelines with regard to all important company pro- ment of the regions in which the Group is active. The company cesses. This system is continually being reexamined, expanded, is involved in cultural, academic, educational, and sportive and brought up-to-date. Risk-optimized training units were also pursuits, and in social and charitable programs. Further infor- conducted in certain compliance risk areas for group managers. mation on these efforts can be found on pages 67 and 77. These programs are to be expanded in the future and extended to a larger group of Jenoptik staff. A compliance board was Jenoptik views the pursuit of sustainable economic and social also created this past fiscal year to link together the Group’s activity while observing prevailing legislature as a top priority other monitoring functions. The new JOI EN PT K AG board and a part of its corporate culture. This entails trust, respect, included representatives from the financial department, internal honesty, and integrity in all dealings with employees, business audit, the legal department, and investor relations. Other staff partners, shareholders, and the general public. Jenoptik views with compliance responsibilities are also included such as compliance with the law, articles of association, internal rules, export control and data protection officers at regular intervals. and voluntary obligations all as part of its compliance policy. The compliance board meets several times a year and discusses The code of conduct for the entire Group was thoroughly compliance topics that emerge in day-to-day affairs as well as revised and brought up-to-date in 2010 to be a guidepost for potential in optimizing Jenoptik current compliance systems. everyone, whether the Executive Board, Supervisory Board, managers, or employees all throughout the enterprise. The code of conduct provides minimum standards and serves as a III. Operating principles of the Executive point of orientation for ethical and legal challenges in the daily Board and Supervisory Board work of all involved, particularly in conflict situations.E very employee has received a code of conduct in German, English, or French (as suits the employee best). Compliance is moni- JOI EN PT K AG is a stock corporation under German law and tored by the internal audit, and violations are investigated and thus features a dual management system in which the Execu- their causes eliminated in the interest of company and all its tive Board runs the company on its own responsibility in the employees. Any employee who wishes to lodge a personal interests of and thus in accordance with the corporate policy of complaint or who wishes to make a note of circumstances the company. The Supervisory Board advices and monitors the indicative of violations of laws or of the code of conduct can Executive Board in its leadership of the company.

16 JOI EN PT K 2010 Declaration of Corporate Governance INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

The members of the JOI EN PT K AG Executive Board are The Supervisory Board of JOI EN PT K AG consists of twelve mem- r lde

appointed by the Supervisory Board. The Executive Board is cur- bers, with six members elected by the shareholders in the o eh

rently composed of two members who share a common annual general meeting and six nominated by employees in ar responsibility for the entire management of the Group and accordance with the Codetermination Act. All members are he sh t decide on primary matters of Group corporate policy, its man- elected for the same period of time, ending with the conclu- for agement and supervision, corporate strategy and annual and sion of the Annual General Meeting in 2012, which will decide longer-term planning. The members of the Executive Board on the formal approval of the actions of fiscal year 2011. In fis- work together in a collegial manner and continually inform cal year 2010, two employee representatives left the Board and INFORMATION INFORMATION each other of important measures and events in their assigned were replaced by two new court-appointed Supervisory Board rt areas. Executive Board meetings take place at least once a members until the end of the other Board members’ terms. The o p e r

month. More information on the areas covered by the individ- Chairman of the Supervisory Board and his deputy were elected t n e

ual members of the Executive Board can be found in the Man- from the Board members in accordance with the relevant legis- m e agement Report on page 40. lation (Sect. 27 para. 1 and 2 MitbestG). No former members

of the Executive Board are now on the Supervisory Board. m The rules of procedure issued to govern cooperation within the u r Executive Board were revised in 2010 to be adopted by both The Chairman of the Supervisory Board coordinates the work of G o anag p the Executive Board and Supervisory Board. This involved, in the Supervisory Board, presides over its meetings, and repre- particular, revising and bringing up-to-date regulations on the sents the body externally. The Chairman maintains regular con- operating principles and decision-making processes of the tact with the Executive Board, and its Chairman in particular, Executive Board as well as a regulation on the avoidance and who provides the Supervisory Board Chairman with immediate resolution of conflicts of interest. The Executive Board is to con- information on important events. If a Supervisory Board vote tinually inform the Supervisory Board in a timely and compre- results in a tie the Supervisory Board Chairman receives a dou- hensive manner, and in both written and spoken communica- ble vote in a subsequent ballot. The Supervisory Board Chair- tion, on all matters relevant to the current development of the man also chairs the Personnel, Mediation, and Nomination Group’s business and financial position. This includes its affects Committees. on employment, investment plans, corporate planning, the company’s strategic positioning and further development as The Supervisory Board meets at least four times a year. Extraor- well as its risk situation and management including compliance. dinary meetings are called for major events. The Board carries Certain Executive Board decisions of particular importance, out a comprehensive formal investigation of its efficiency at such as corporate planning decisions or expansion to new least once every two years and discusses the results of the areas of business, require the approval of the Supervisory investigation at a meeting. Suggestions by members on ways Board. They are also specified in the Executive Board rules of to improve the work of the Supervisory Board and its commit- procedure. Further information on the cooperation between tees are always welcome and are often implemented immedi- the Executive Board and the Supervisory Board can be found ately. This past fiscal year, the Supervisory Board was able to in the Supervisory Board Report beginning on page 5 of this confirm the efficiency of its work and of its committees in a Annual Report. self-evaluation.

JOI EN PT K 2010 17 INFORMATION for the shareholders Declaration of Corporate Governance

The Supervisory Board also revised its rules of procedure in fis- The Nomination Committee, which is tasked with the prepara- cal year 2010, which govern important aspects of its work as a tion of the nomination of candidates to be elected by the body, adapting, in particular, the rules on decision-making to Annual General Meeting to the Supervisory Board, meets only modern forms of communication. The obligations for the Exec- when necessary, as does the Mediation Committee, which is utive Board to report to the Supervisory Board were also charged with tasks in accordance with Sect. 31 of the Codeter- defined more clearly in line with the Stock Corporation Act and mination Act. the German Corporate Governance Code. The Capital Market Committee, which grapples with capital The Supervisory Board formed five committees (Personnel, market topics affecting the company, including the planning Audit, Capital Market, Nomination, and Mediation Committees) and implementation of possible capital measures, also only to make its work more efficient. The committees are made up meets when necessary. of equal numbers of shareholder and employee representatives, except for the Nomination Committee, which is made up only Further information on the Supervisory Board, its committees, of shareholder representatives. Specifics on the composition of and their operating principles in fiscal year 2010 can be found the committees in fiscal year 2010 can be found in the Notes in the Supervisory Board Report published from page 7 of the on pages 174 / 175. The expertise of the candidates is taken Annual Report. into account in the formation of the committees. Inasmuch as it was legally permissible, the decision-making process for cer- JOI EN PT K AG has taken on D & O insurance for all its Executive tain individual matters was transferred to the individual com- Board and Supervisory Board members, with both Boards mittees. The committees prepare resolutions for the plenum agreeing to an appropriate deductible pegged at 10 percent of and topics to be taken up by the Supervisory Board. In the sub- any liability but capped at a maximum of one and a half times sequent Supervisory Board meeting, the committee chairper- the fixed annual remuneration of each insured board member. sons report to the full Board in detail on the content and results This was to begin on January 1, 2011. of the committee meetings.

The Audit Committee meets at least four times each year. Its discussions revolve in particular around matters concerning accounting and auditing, the effectiveness of the risk management system and the internal control system including internal audit and compliance. In accordance with the Stock Corpora- tion Act, the committee must have at least one independent member who is well versed in accounting or auditing.

The Personnel Committee meets at least once a year and prepares, among other things, the personnel decisions of the Supervisory Board with a view to the Executive Board remuneration system and target agreements.

18 JOI EN PT K 2010 INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information

Improving the quality of our lives: Jeoi n pt k technology for today and tomorrow.

Our focus lies on technology. While our scope remains as broad as Humanity and the world we inhabit. Our focus lies on health and safety, Mobility and communications, On more power and less emissions, And on progress and sustainability. We place our focus on our lives today, And those of our children tomorrow.

The following examples from our five divisions speak to the great importance of these values – even in economic terms.

20LE AS Rs & Material Processing

22 Optical SYSTEMs

24 Industrial Metrology

26 Traffic Solutions

28 Defense & Civil SYSTEMs

JOI EN PT K 2010 19 INFORMATION for the shareholders 2010 in Review

2010n i Review

Jenoptik begins the year by consolidating its The Traffic Solutions division joins the Jenoptik The Jenoptik Lasers & Material Processing division entire U.S. optics business under the umbrella of umbrella brand as of the beginning of February. receives a major order to deliver medical lasers JENOPTIK Optical Systems Inc. With its new struc- The division delivers its new TraffiSection® traffic worth 16 million U.S. dollars to American cus- ture, Jenoptik will be better able to expand within monitoring system, which measures the average tomers over the next three years. the North American market from its headquarters speed of a vehicle, to Austria, Switzerland, and in Jupiter, Florida. Kuwait for about 4 million euros. The Traffic Solutions division receives a major order for over 12 million euros for systems to be Jenoptik sells its 10,000th sJenLa ® D2.x green thin- Jenoptik RGB lasers, known as WhiteLight lasers, delivered and installed before the end of 2010. disk laser at the Photonics West trade fair in San are employed at the Vancouver Winter Olympics. Francisco. More than 1,000 of the systems have Jenoptik raises over 22 million euros in a capital been manufactured each year in Jena since pro- Even before its official opening in March, Jenoptik increase which are to be used to expand the duction began. And, for the first time,J enoptik begins to receive orders for laser processing sys- company’s core business and international pres- has come out with a new version of the successful tems via its new laser application center in South ence. product, which was received with great interest. Korea. The center allows potential customers in Asia to test Jenoptik systems on site.

JANR UA Y FBRE RUA Y Mrh a c

10,000 th kthin-dis laser sold. L aser application center in South Korea opened. Another major order for Traffic Solutions.

C ooperation with Leica expanded. Major order for Eurofighter radomes. New laser systems for photovoltaics industry.

JLU y AS UGU T SEPE TEMB R

The Optical Systems division receives the “Pre- A total of 34 new Career Academy students Jenoptik presents new laser systems for crystalline ferred Supplier Award” from Leica Camera AG. begin their career training at Jenoptik sites photovoltaics at the PVSEC trade fair in Valencia, The award is a reflection both of its strong cur- around Germany. to complement the company’s laser processing rent production and the rapid expansion of its systems for thin-film technology. There is particu- production capacities in response to the high The Defense & Civil Systems division receives a lar demand for the modular system for use in a demand for the “old-school” Leica M9 camera. major 20-million-euro order for radomes to be variety of production processes. Jenoptik provides the main electronic compo- used in the production of Eurofighter aircraft. nents for the device. Along with other major orders, this contributed Another major order for the Defense & Civil Sys- to a divisional record in order intake that con tems division: Jenoptik receives a 23-million-dollar Jenoptik’s Industrial Metrology division produces tinued throughout the year. order from the U.S. government for power gener- its 1000th HMML O E -ETAMIC opticline C ONTOUR ators. The units are slated for use in a Patriot optical shaft measuring system some ten years missile defense system to protect the infrastruc- after the first generation of the product family ture of an Arab country. Delivery is to follow from went into production. Jenoptik is the global mar- 2011. ket leader in this field of technology.

30 JOI EN PT K 2010 2010 in Review INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information s

The Optical Systems division unveils optoelec Jenoptik expands its capacity in China, with a Jenoptik teams up with Dräger to present two r

tronics components and modules for innovative new Industrial Metrology division building in new thermal imaging cameras for use by fire lde o lighting applications at the Light + Building trade Shanghai to combine planning, production, and fighters and rescue services. The Dräger camera is eh fair in Frankfurt. Jenoptik also presents an inno sales alongside an application and training center built around a Jenoptik infrared module that is in ar vative new LED streetlight together with all in one place. The new site is also available for serial production in Jena. he sh t Lumenova, Jenoptik’s partner in the project. use by other divisions. The JenLas® D2.mini green diode-pumped thin- for Jenoptik donates the 14,800 euros collected at its The Industrial Metrology division unveils a flexible disk laser goes into serial production. Considerably New Year’s reception to a daycare center in Trip- and modern internal test sensor, which can be more compact than its predecessor, the new laser tis, Thuringia, Germany, the location of the com- used in fully automatic drilling processes. also provides a greatly improved beam quality.

pany’s Optoelectronic Systems business unit. INFORMATION The TrafficS olutions division’s TraffiStar system Jenoptik sells its minority share in caverion GmbH records speeding vehicles in an Autobahn tunnel to the Finnish building and technology group YTI . rt o

near Berlin using the Black Flash technology Jenoptik, which will continue to focus more p e r

developed by Jenoptik. closely on its core business, received a high t n

double-digit million euro sum in the deal. e m e

Api r l may June m u r G o anag p

Innovative light applications presented. F or flexible use – the new internal test sensor. New thermal imaging camera on the market.

Fr i st prize for traffic safety project. Presence in Japan expanded. Jenoptik sells space business.

OcTOE B R NOE V MB R DEE cEMB R

Jenoptik produces its first laser processing sys- Jenoptik is now present in Japan with a majority Jenoptik successfully concludes the sale of its tems for use in 3D metal processing. The flexible shareholding. Kantum Electronics will also con- space business. Astrium, an ESAD subsidiary, three-dimensional laser cutting and welding of tinue to participate in the company, following on acquires all shares in Jena-Optronik GmbH. metals will allow Jenoptik to meet any particularly many years of close and successful partnership Activities in the areas of security and defense complex individual needs of its customers. with Jenoptik. Previously specialized in the distri- technology and in aerial cameras, however, bution of high-power diode lasers, the Japanese remain with Jenoptik. The resulting cash inflow Jenoptik supports a traffic safety project in Wei- unit will now be open to all Jenoptik divisions. reduces the net debt significantly to below mar. A speed indicator installed at a pedestrian 80 million euros. With the sale, Jenoptik is able crossing there will provide increased safety for The Defense & Civil Systems division will supply to give a more detailed EBT I forecast for 2010. children. The project is awarded first prize by the 40 ground power units and 25 frequency con- European Transport Safety Council in its “Roads verters to a passenger airline for the airport infra- to Respect” campaign. structure of a Middle Eastern country, beginning in 2011. The contract comes to 5 million euros.

JOI EN PT K 2010 31 INFORMATION for the shareholders The Jenoptik share

Theeo J n ptik share

The Jenoptik Group developed well from a business perspective in 2010, with sales and earnings both rising considerably. This was bolstered both by the overall economic recovery and by the Group’s own cost cutting measures and process improvements. Net debt was strongly reduced to 79.3 million euros through a capital increase measure in spring 2010, the sale of shares in caverion GmbH and the sale of Jena-Optronik GmbH as well as an active working capital management scheme. The resulting funds are being used to expand the operative business and to be more active in the international arena, as ways of continuing sustainable growth into 2011 as well.

The world’s economy recovered in 2010, with positive com- The positive development of the Jenoptik share in 2010 was pany news boosting the development of capital markets. The reflected both in terms of market capitalization and stock euro crisis, concerns about state debt, and worries about fur- exchange turnover. On the basis of approximately 57 million ther economic development all, however, led to a certain shares issued, market capitalization came to roughly 309.1 mil- amount of turbulence and to dips in share prices. The German lion euros as of December 30, 2010 (30.12.2009: approx. stock market performed quite well on the whole, especially in 197.2m euros at approx. 52m shares issued). An average of the 4th quarter. The Dax, the chief German stock index, rose by 174,627 Jenoptik shares were traded each day on all German around 14 percent for the year from 6,048.30 to 6,914.19 exchanges, a clear increase from the 147,065 shares traded on points, while the TecDax index rose only just under 2 percent average in 2009. Over 80 percent of this turnover occurred in from 834.46 to 850.67 points. Xetra trading. According to the criteria of stock exchange turnover and market capitalization in relation to free float Development of the Jenoptik share price (30.12.2010 Jenoptik 220.2m euros as reported by the In 2010, Jenoptik shares were up over 28 percent, thus outpac- Deutsche Börse), Jenoptik came in 24th of all 30 TecDax compa- ing both Dax and TecDax, but undergoing considerable move- nies as of December 30, 2010, and 27th in stock exchange turn- ment throughout the year. After rising strongly to begin the year, over. 4 a first drop came following the capital increase measures in March 2010. The Jenoptik share price then followed the general C apital increase successfully implemented trend on the capital market through the middle of year, closing Jenoptik introduced a 10-percent capital increase on March 10, Xetra trading on July 1, 2010 at its lowest point for year, 2010 with some 5.2 million shares issued to institutional 3.85 euros. A strong rise in price followed a rise in the forecasts investors via an accelerated bookbuilding process to the exclu- for fiscal year 2010 in early August. The sale of Jena-Optronik sion of the subscription rights of shareholders. The issued GmbH and the considerable reduction in net debt gave the share capital thereby rose to 148,819,099.00 euros, divided into price another boost over the last few months of the year, 57,238,115 no-par value bearer shares. The emission price was peaking at 5.70 on December 8, 2010, and closing the year at set at 4.25 euros and the proceeds came to approximately 5.40 euros in Xetra trading. 1 22 million euros. This will be used to finance major traffic safety orders, to expand Jenoptik’s global presence and that of The share continued its upward trend also at the beginning of its laser business in Asia and North America in particular, and 2011. On February 18, 2011 the share reached its highest also for smaller acquisitions that will serve to increase the Xetra closing price over the last 14 months at 6.00 euros and Group’s profitability. The Group’s product portfolio and value- closed trading in February at 5.77 euros. added chain are also to be solidified in the process.

32 JOI EN PT K 2010 The Jenoptik share INFORMATION for the shareholders Go anagr up m ement report consolidated financial statements Notes to the consolidated financial statements additional information

1 s Jeoi n pt k share development (January 4, 2010 through February 28, 2011) r lde o eh

6 € 6 ar he sh t

for 5 € 5

4 € 4 INFORMATION rt o p e r

3 € t 3 n JAN ’10 FE M B’10aR ’10 APR ’10 MAy ’10 JUN ’10 JUL ’10 AUG ’10 SEP ’10 OcT ’10 NOV ’10 DEc ’10 JAN ’11 FEB ’11 e m e

Jenoptik Xetra TecDXA (indexed) X DA (indexed) m u r G o anag p

2 Srhha e older structure (as of December 31, 2010) Jeoi n pt k share information 3

69,65 % 25,02 % 5,33 % I SIN DE0006229107 WKN 622910 Ticker symbol JEN Reuters Xetra JENG.DE Bloomberg JEN GR

0 10 20 30 40 50 60 70 80 90 100 Listed in the following indexes: TecDax DxH a Prime All Share DAXsector All Industrial Dax International Mid 100 DxC a

F ree float ECE Industriebeteiligungen GmbH Z oom Immobilien GmbH DAXsubsector Advanced Industrial Equipment DAXsubsector All Advanced Industrial Equipment Technology All Share MDICAP MKT

4 eoiJ n pt k share key figures (in EUR)

2006 2007 2008 2009 2010 Group earnings per share 0.22 – 0.16 0.23 – 0.73 0.65 Highest share price / Lowest share price (Xetra) 8.35 / 6.30 8.23 / 5.51 6.07 / 3.44 6.19 / 2.83 5.70 / 3.85 Closing share price (Xetra year-end) 7.50 6.25 5.00 3.79 5.40 Average daily trading volume 1) 127,712 139,199 160,866 147,065 174,627 Market capitalization (Xetra year-end) 390.3m 325.2m 260.2m 197.2m 309.1m per (based on highest share price) / per (based on lowest share price) 37.95 / 28.64 n. a. 26.39 / 14.96 n. a. 8.77 / 5.92 Non-par value bearer shares issued 52.03m 52.03m 52.03m 52.03m 57.24m Bond (closing price, Frankfurt, year-end) 106.00 – – – – Convertible bond (closing price, Frankfurt, year-end) 93.00 93.00 92.00 – –

1) Source: Deutsche Börse

JOI EN PT K 2010 33 INFORMATION for the shareholders The Jenoptik share

Intensive communications Annual General Meeting with the capital market Some 300 shareholders attended the JENOPTIK AG Annual It is of great importance to Jenoptik to ensure transparent, General Meeting in Weimar on June 9, 2010, representing over open, and reliable communications with capital market partici- 50 percent of the voting capital. The agenda included among pants. We thus provide comprehensive and up-to-date infor- other things the creation of authorized capital and several mation on the development of the Jenoptik Group and seek amendments to the Articles of Association. The Annual General out an active dialogue in the process. Over the past year, Meeting approved all resolutions proposed by the Executive Jenoptik management, in cooperation with investor relations, and Supervisory Boards by a clear majority. presented the Group at two analyst conferences in Frankfurt, All documents and information including the voting results fol- various bank conferences both within Germany and interna- lowing the Annual General Meeting are made available for tionally, and at road shows in Frankfurt, London, Zurich, shareholders on our Internet page www.jenoptik.com under Vienna, Brussels, Amsterdam, and in various cities in the United Investors / Annual General Meeting The next Annual General States and Canada. We also explained our financial figures and Meeting is scheduled for June 8, 2011. strategy to institutional investors, analysts, and journalists in telephone conferences following the publication of annual and Shareholder structure quarterly figures and in individual conversations. A number of There have been no major changes in the Jenoptik shareholder investors also used the opportunity to visit Jenoptik production structure over the past fiscal year. As of December 31, 2010, sites in Jena and Wedel, Germany. Comprehensive and Jenoptik’s free float came to 69.65 percent, while the largest up-to-date information on the Jenoptik share and the devel individual shareholder was ECE Industriebeteiligungen GmbH of opment of the Jenoptik Group on the company website Vienna, which reported a 25.02-percent share in early 2008. www.jenoptik.com under “Investors”, all to make things easier ZOOM Immobilien GmbH of Munich (legal successor to VARIS for analysts, institutional and individual investors and interested Vermögensverwaltungs GmbH) holds 4.84 percent of Jenoptik. parties alike. A large portion of the free float shares continues to be held by institutional investors. JENOPTIK AG has no treasury shares. Ten analysts continued to follow the development of the Jenoptik received voting rights announcements from UniCredit Jenoptik Group in 2010, publishing regular research reports Bank AG of Munich in March 2010 and from Templeton Invest- and commentaries on the company’s development and current ment Counsel, LLC of Fort Lauderdale, Florida in September events. Berenberg Bank initiated their coverage of Jenoptik in 2010. 2 January 2011and set their recommendation to “buy”. HSBC followed also with a “buy“ recommendation in February. An overview of current analyst evaluations can be accessed at www.jenoptik.com by following the links to Investors / Share.

5 Analyst recommendations (as of February 28, 2011)

10 x buy 1 x outperform 2 x hold

34 JENOPTIK 2010 The The structure oftheManagementReporthasbeenmaintained, c F for

Je us 6 expenditure andmarketing.Informationonenvironment and S sustainability includedataonthemediaconsumption,recorded for thefirsttime,ofGermanlocations. while thesizehasbeenextendedagainincomparisonwithlast year. Reporting, havebeenexpanded. 8 8 7 5 3 03 9 9 9 3 tatements, amongotherthings,intheRiskReportand

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t h e c e c I NFORMATION NFORMATION o o n n s s o o l l Group mana Group i i d d a a IK 2010 IK O J t t E a e e N d d d d f d f f P S or i inan inan T tiona egment

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Go anagr up m ement report INFORMATION for the shareholders g roup management Report Business and framework conditions

1Bsn u i ess and framework conditions

Note. The reporting, both in the Management Report and the 1.1 Group structure and business activity Notes, is carried out on the basis of the Lasers & Optical Sys- tems (Lasers & Material Processing and Optical Systems divi- Bsn u i ess areas and organizational structure sions) and Metrology (Industrial Metrology & Traffic Solutions As an integrated optoelectronics group, Jenoptik operates in divisions) segments as well as the Defense & Civil Systems seg- five divisions: ment, which corresponds to the division of the same name. • Lasers & Material Processing, Except for information on earnings from operating activities in • Optical Systems, the segments (segment EBT I ) and earnings from operating • Industrial Metrology, activities in the segments before interest, taxes and deprecia- • Traffic Solutions, tion and amortization (segment EBT I DA), all figures given can • Defense & Civil Systems be compared with those for 2009, as both these figures have been shown after Group charges since 2010. Figures for the Group-wide processes are combined within the Shared Service previous year have been accordingly adjusted and therefore Center. These include information technology, operational HR diverge from the segment EBT I information published a year management, the purchase of materials and services for multi- ago. The Jenoptik holding company plus real estate (others), ple divisions, real estate management, the areas of security, special topics and consolidation effects (adjustments) are cate- technical services as well as health and safety at work and envi- gorized under “Other”. ronmental protection. The Corporate Center covers the central areas and is integrated within the holding company JOIKEN PT AG. 6

Pro ducts, services and business processes Jenoptik is primarily a supplier of capital goods and consequently a partner for industrial companies. In the TrafficS olutions and Defense & Civil Systems divisions, we are also a major supplier to the public sector either directly or indirectly via system inte- grators. We do not focus on consumer markets. We supply many of our systems and facilities to customers who are themselves based in the technology sector. Key importance is

6 ORGANIzATIONal STRUcTURe

corporate center

Lasers & optical systems M etrology defe nse & civil systems SEGMENT SEGMENT SEGMENT

Laemats rs & erial dee fens & oi pt cal systems in riadust l traffi c solutions processing civil systems Division metrology division division Division division

shared services

36 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

attached to research and development within our business pro- In the field of Industrial Metrology, Jenoptik is one of the lead- s r de cesses. We carry out custom development and manufacture for ing manufacturers of and system providers for high-precision, l o h e many of our customers and partners. contact and non-contact production metrology. The range of r a

products covers total solutions for a wide range of measure- e sh h t Our product portfolio ranges from complex systems, industrial ment tasks such as roughness, contour and shape testing, as or f facilities and production lines through to modules and sub well as for determining dimensions in every phase of the manu- systems down to individual components. The Jenoptik Group facturing process and in the metrology room. The product

also successfully markets comprehensive total solutions and / or range is rounded off by a comprehensive service offering such INFORMATION operator models consisting of system and facility integration as advice, training and after-sales service, including long-term and their corresponding networking, as well as project man- maintenance agreements. agement, data processing and after-sales service.

In the Traffic Solutions division, Jenoptik develops, manufac- ment report e In the Lasers & Material Processing division, we have expertise tures and markets components and systems that increase road g along the entire added value chain for laser material processing traffic safety throughout the world. The product portfolio, and are a leading supplier – from individual components to which is based on the proven Robot technology, includes com- complex systems. In the area of Lasers, Jenoptik specializes in prehensive systems for all aspects of road traffic, such as speed Group mana high-quality semiconductor material, reliable diode lasers and and red light monitoring systems as well as O EM (Original innovative solid-state lasers, such as thin-disk and fiber lasers. Equipment Manufacturer) products and systems for detecting The Group is also acknowledged worldwide as a leader in qual- traffic violations. In the services area, the Jenoptik division cov- ity for high-power diode lasers. In the field of laser processing ers every aspect of the support process chain – from system systems, we develop systems that are integrated into produc- development, construction and installation of the monitoring tion facilities for our customers as part of their process optimi- infrastructure, to capturing images of infringements and their zation and automation. These systems are used for processing automatic processing, through to issuing the citations and col- plastics, metals, semiconductor materials and solar cells using lecting the fines as the system operator. both thin-film and wafer technology with maximum efficiency, precision and safety. The Defense & Civil Systems division focuses on the areas of military and commercial vehicle, rail and aircraft equipment, Our Optical Systems division makes us one of the few manufac- drive and stabilization technology as well as energy systems. turers in the world to produce precision optics and systems The product range also includes optoelectronic instruments and designed to meet the most stringent quality standards. In addi- systems for the security industry as well as software, measure- tion to supplying optomechanical and optoelectronic systems, ment and control technology. In the laser and infrared sensor modules and assemblies, the division is a development and pro- systems field the focus is on the development, manufacture duction partner for optical, micro-optic and coated optical and marketing of laser distance measurement equipment as components made of optical glass, infrared materials and plas- well as infrared camera systems designed to meet a wide range tics. Our outstanding expertise lies in the development and of applications. manufacture of micro-optics for beam shaping used in the semiconductor industry as well as for laser material processing. The portfolio also includes components and systems for life sciences, lighting & energy applications, system solutions and modules for digital image capture and analysis as well as cameras for digital microscopy.

JO EN PTIK 2010 37 g roup management Report Business and framework conditions

JO EN PTIK: the key locations

7 g ermany europe

s t. petersburg

russia

WEDEL

ben rli

h mildeshei t eeplic

gtingöt en ESSEn BYUA E X RATINGEN czechia MONEM H I france J Ena uster eahis n c peseux Ti r pt s switzerland

spain

Mi adr d

vlngil i en-schwenningen altenst dt

Key locations Kes y ales markets and competitive positions The Jenoptik Group is represented in 70 countries worldwide, Our key markets mainly include the security and defense tech- in 20 of these through its own companies, investment holdings nology industry, the machine construction and automotive or a direct local presence. Jenoptik’s headquarters and main market, the aviation industry, the market for traffic safety sys- focus of production are in Germany. In addition to the head- tems, the medical technology industry as well as the semicon- quarters in Jena, other major locations include Wedel near ductor and photovoltaics industry. Hamburg, Monheim near Düsseldorf, Villingen-Schwenningen, Triptis and Eisenach in Thuringia, Berlin, Altenstadt (Bavaria) The key sales regions are Europe, North America and Asia. It is and Essen. Outside Germany, Jenoptik is represented for exam- not possible to give a general statement regarding the Group’s ple by locations in the US, A France, Switzerland, Spain and Rus- overall competitive position – either in the key markets or the sia as well as in the growth regions of India, China and South main sales regions – since Jenoptik competes with the respec- Korea. 7 8 tive products and technologies in various markets and regions.

Over and above its production facilities, the Jenoptik Group has Economic and legal influencing factors sites in those countries that occupy a key position for the oper- As a result of having a broad presence, we are better able to ational business. It also has a global network of dealers and cope with cyclical fluctuations that impact on individual sectors partners. than those companies which operate in just one or a few markets. On the economic side, we are dependent upon the invest-

38 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

8 s america and asia r de l o h e r a e sh h t

or f

Brigon ht R ochester Hills EMASTHA PTON S outh korea USA LNTUI HIC M J Apan SanRfa a el RO ChesTER PNGTAYEO EK Ykomao ha HUTV N S ILle I srael Yavne SHNGI A HA INFORMATION CHINA jptu i er

INDIa

BNGARA LO E ment report e g Group mana

ment climate in the wider sense. Jenoptik’s most stable market Mnaga ement & control is traditionally defense & security technology. The semiconduc- The Supervisory Board of JOIKEN PT AG comprises 12 members, tor equipment market is the most cyclical market. We do not six of whom are employee representatives. Since June 2008, operate in consumer goods markets, some of which are subject Rudolf Humer, entrepreneur, Hinterbrühl (Austria), has been the to strong seasonal fluctuations. Chairman of the Supervisory Board. The Supervisory Board of JOIKEN PT AG saw the following changes in 2010: as at Novem- Our products and services are primarily aimed at industry and, ber 30, 2010, the longstanding Group chairman of the works in individual areas, public sector customers. There are export council and its longest serving member, Günther Reißmann, regulations governing the export of certain high-tech products stepped down from the Supervisory Board, having reached the as well as components in the defense technology field.H ow- retirement age for active service at JOIKEN PT AG. At the ever, Jenoptik exports these products only to a minimal extent. suggestion of the Group works council, Dieter Kröhn was The largest share of these is supplied to NATO partners in appointed a member of the Supervisory Board until the end of Europe and to Switzerland. Individual products and services in the current Supervisory Board’s term of office by order of the the defense technology field and for the public sector are also Jena district court. With the completion of the sale of all shares subject to legal influencing factors such as the International in Jena-Optronik GmbH, the office of Anita Knop as employee Traffic in Arms Regulations(ITAR) , local content regulations or representative on the Supervisory Board ceased to exist. C hristel price clauses. Knobloch was appointed a member of the Supervisory Board, also until the end of the current Supervisory Board’s term of

JO EN PTIK 2010 39 g roup management Report Business and framework conditions

office, by order of the Jena district court.W ith effect from Jan- Ba t sic fea ures of the remuneration system uary 1, 2011, Michael Ebenau was elected as the deputy chair- An in-house collective wage agreement forms the basis of man of the Supervisory Board. Wolfgang Kehr stepped down remuneration for approx. 800 employees and trainees at the from his position as Deputy Chairman of the Supervisory Board Jena site. Since January 1, 2010, a new form of the in-house as of December 31, 2010, having reached the retirement age collective wage agreement had been in force and provided for for active service at IG-Metall. He will continue to observe his a rise in employee remuneration in two stages: an increase by mandate as member of the Supervisory Board at JOIKEN PT AG. 1 percent as of October 1, 2010, with a further 0.5 percent as of January 1, 2011. The new collective wage agreement also The Jenoptik Executive Board comprises two members: ruled out compulsory redundancies in its area of validity in Dr. Michael Mertin, Chairman of the JOIKEN PT AG Executive 2010 and included the taking-on of trainees following success- Board and Frank Einhellinger, Chief Financial Officer of ful completion of vocational training until at least December 31, JOIKEN PT AG. The Chairman is responsible for the entire oper- 2010, insofar as no personal grounds dictated otherwise. In 2010, ating business as well as the areas of legal affairs, strategy, the collective wage agreement regulating general working condi- business development & innovation management, communications, wages and salaries as well as education within the frame- tion & marketing, quality processes, purchasing & supply chain work of vocational training was terminated by the IG Metall union management, auditing, supervision of official bodies, corporate to March 31, 2011. Negotiations for these will take place in 2011. governance, data protection, IT, Shared Service Center and for personnel as H R Director. In addition, the collective wage agreement includes a profit- sharing scheme for the employees, comprised of a Group com- The C FO is responsible for the areas of accounting & control- ponent and a division component. The Group component ling, taxes, treasury, risk management, security, strategic real represents a pro rate distribution of the annual Group earnings estate portfolio, investor relations and health and safety at before tax (B)E T per employee. The division component repre- work and environmental protection. sents a pro rata distribution on the basis of a basic amount totaling half of an employee’s monthly remuneration. This basis The leadership structure of the Group corresponds to the is dependent on the proportional degree of achieving the Group structure. Each of the five divisions, within which the budgeted division’s earnings before interest and taxes (BT)E I entire operating business is integrated, has a Head of Division compared with the division’s earnings before interest and taxes who is responsible for the management of the operating busi- (BT)E I actually achieved at the end of the year. The distribution ness within the division, the structure of the organization is capped and will not be made below a minimum EBT I . including the cross-divisional functions, and has responsibility for the results and, with the division’s strategic orientation, for For employees in the Group to whom the regional collective the target markets, product strategies, RD + roadmaps, growth wage agreement for the metal and electrical industry applies, initiatives and monitoring of competition. The strategic deci- a one-off payment for full-time employees of 320 euros gross sions of the Group as a whole are taken by the eight-strong was granted in 2010 for the period from May 1, 2010 to Executive Management Board, comprising the Executive Board March 31, 2011, half of which was due with wage and salary of JOIKEN PT AG, the five Heads of Division, and the Head of payments in May, and the other half in December 2010. This HR, Supply Chain Management & Shared Service Center.

40 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

one-off payment was granted proportionally to part-time again reviewed and adjusted in fiscal year 2010. The criteria of s r de employees and trainees. As at April 1, 2011, gross salaries and appropriate Executive Board remuneration are based in particu- l o h e wages will be increased by 2.7 percent. lar on the work tasks of Executive Board members, their per- r a

sonal achievements, the economic situation, success and the e sh h t At the Monheim site, employees with an employment contract company’s future prospects. A remuneration benchmark in or f from July 1, 2010 at the payment date received a one-off pay- comparison with industry peers is also considered. The remu- ment of 500 euros gross. As at September 1, 2010, gross basic neration of the Jenoptik Executive Board comprises a non-

salaries and wages were increased by 1.5 percent. There will be performance related and a performance related component. INFORMATION a further increase of 2 percent from July 1, 2011, which will be The non-performance related components include the fixed reduced to 1 percent unless at least 50 percent of the target amount, supplementary benefits as well as the pension com- earnings for 2011 are reached. mitments. The performance related elements of remuneration

consist of a bonus and a share-based Long Term Incentive ment report e Jenoptik has also been offering an employee-funded retirement component (I)LT based on virtual shares. These serve as long- g provision model since 2001. This model is based on a three-pil- term performance incentives and support sustained corporate lar concept comprising the provident fund, the pension scheme development. of the metals industry as well as private pension agreements Group mana with Allianz Lebensversicherung AG. No direct pension guaran- Fixed salary. Non-performance related basic remuneration is tees are given by Jenoptik. Existing pension liabilities for ESW paid pro rata monthly. As of January 1, 2011, the fixed salary GmbH have been taken on and combined and secured within for the board members has been increased. the framework of a Contractual Trust Arrangement (A)CT . More information on this can be found in the Notes under point 27. Variable remuneration. Members of the Executive Board are entitled to a variable remuneration, part of which is granted in The remuneration system for the Jenoptik management is based cash and part in form of virtual shares. These are based on on variable elements of remuneration in line with the result and personal target agreements which are to be concluded in the free cash flow of the division and, in part, the Group as a whole. first quarter of each calendar year and in which strategic tar- In addition, individual strategic and personal targets are agreed. gets for the Group as a whole and corporate success are mani- The target agreements for employees of JOIKEN PT AG (holding) fested. The basis for calculation are the Group EBT I , the operat- include a subdivision into personal and Group targets. The ing free cash flow, the Group net income, targets relating to Group targets are guided by the result and the free cash flow the capital market and share price, strategic targets and opera- of the Group as a whole. tional targets for the year in question and the long-term as well as an individual performance assessment. Each of the individual Remuneration for the Executive Board. The Supervisory Board, targets is capped. In addition, the sum of the individual targets, following preparation by the Personnel Committee, is responsi- on which the variable bonus is based, have an overall cap. ble for the composition of the individual remuneration for the Executive Board members. To ensure full compliance with the The share of the variable remuneration to be paid in cash new statutory guidelines in accordance with the Act on the becomes due on finalization of the respective annual financial Appropriateness of Management Board Remuneration statements of JOIKEN PT AG and the subsequent audit of the (VorstAG), the details of remuneration arrangements were consolidated financial statements by the Supervisory Board.

JO EN PTIK 2010 41 g roup management Report Business and framework conditions

A further part of the variable remuneration, which was agreed value and a taxable payment in kind for private use of the com- for the first time for fiscal year 2009, consists of La ong Term pany car. Both members of the Executive Board will also receive Incentive component in form of virtual shares as share-based a contractually vested right to their benefits if they continue to part of the remuneration. If the criteria stipulated in the target pay their contributions until the standard termination of each agreement for issuing the virtual shares are met allocation of of their contracts of service (up to a maximum of three years). the shares is made on the basis of the success with which targets have been achieved. Shares issued may be paid out If the contract of service with Dr. Mertin is not extended beyond after expiry of the fourth subsequent year on the basis of the the end of its standard term, he will be entitled to bridge pay- average closing price of the share in XRAET trading at the ments of 80 percent of one twelfth of his annual remuneration Frankfurt Stock Exchange over the course of the full fourth year for a period of twelve months following standard termination following. of the contract. The annual remuneration is determined by the same rules governing compensation payments in the event of a Supplementary benefits exist in the form of occupational change of control. Income from the employed and / or self- indemnity insurance, accident insurance and payments for an employed work of the Executive Board member, in particular as occupational pension scheme. This is based on a pension fund a member of a managing or supervisory body to another reinsured by a life insurance. In addition, private use of a com- company, as well as possible compensation for restraint of pany car is included. competition will be taken into account in the bridge payment. Bridge payments will not be paid if the non-renewal of the In the event of a change of control of JOIKEN PT AG, a change contract of service is founded on serious breaches of duty by of control clause becomes effective for both members of the Executive Board member, the employment is terminated by the Executive Board from an acquisition of at least 30 percent extraordinary termination or the Executive Board member of the voting rights in JOIKEN PT AG, providing them with the rejects a renewal of the contract for services on the same, or right to give notice within a specific timeframe following equivalent or improved terms. transfer of control. An Executive Board member who provides notice of termination is entitled to the payment of compensa- Specific details onE xecutive Board and Supervisory Board remu- tion calculated according to the following formula: multiplier x neration, including the individual itemization of the remuneration (annual remuneration / 12). The multiplier is 36. If there are for members of the Executive Board and Supervisory Board, can fewer than 36 months between the date of termination and be found in the Notes under the point Executive Board, the the standard end of contract term, the multiplier is reduced point Supervisory Board under point 30, IRFS 2. We regard this to the number of remaining months between the standard end information and the above details on the remuneration system of contract date and the date of termination. The annual as part of the Remuneration Report and consequently of the remuneration comprises the annual salary, the variable elements Corporate Governance Report of this Annual Report. of remuneration including the L TI calculated as an average

42 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Supplementary details in accordance with the 4. Holders of shares with special rights conferring powers of s r de Takeover Directive Implementation Act control l o h e Reporting on Section 289 Para. 4, Section 315 Para. 4 HGB JOIKEN PT AG has no shares with special rights. r a

(German Commercial Code) e sh h t 5. Form of controlling voting rights if employees own shares or f 1. Composition of the subscribed capital and do not directly exercise their control rights As of the balance sheet date on December 31, 2010, the There are no employee shareholdings and therefore no resul-

subscribed capital amounted to 148,819,000 euros (prev. year tant control of voting rights. INFORMATION 135,290,000 euros). It is divided into 57,238,115 (prev. year 52,034,651) no-par value bearer shares. Each share in the 6. Statutory regulations and provisions of the Articles of Associ- nominal capital is therefore worth 2.60 euros. ation relating to the appointment and dismissal of Executive

Board members and changes to the Articles of Association ment report e The same rights and duties apply to all shares in the company. The appointment and dismissal of Executive Board members is g Each share represents one vote in the General Meeting and is carried out exclusively in accordance with the statutory regula- the determining factor for the shareholders’ proportion of tions of Sect. 84, 85 of the Stock Corporation Act (AktG) and

company profits (Sect. 58 Para. 4, Sect. 60 AktG (Stock Corpo- Sect. 31 of the Codetermination Act (MitbestG). In accordance Group mana ration Act)). The shareholders’ rights also include a subscription with this, the Articles of Association, Sect. 6 Para. 2, state that right to shares in the event of increases in capital (Section 186 the appointment of members to the Executive Board, the revo- AktG). In addition, the shareholders are entitled to adminis cation of their appointment and the conclusion, modification trative rights, e. g. the right to participate in the Annual General and termination of contracts for services with members of the Meeting and the authority to put forward questions and Executive Board shall be effected by the Supervisory Board. In motions and exercise their right to vote. The shareholders’ fur- accordance with Sect. 31 Para. 2 of the Codetermination Act, a ther rights and duties are defined in theS tock Corporation majority of at least two thirds of the members of the Supervi- Act, in particular in Sect. 12, 53 et seq., 118 et seq. AktG. In sory Board is required for the appointment of Executive Board accordance with Sect. 4 Para. 3 of the Articles of Association, members. Revocation of appointment as a member of the all claims by a shareholder to the securitization of his or her Executive Board is only possible for serious reasons (Sect. 84 shares are excluded. Para. 3 of the Stock Corporation Act).

2. Restrictions affecting voting rights or the transfer of shares Sect. 6 Para. 1 Clause 1 of the Articles of Association specifies There are no known restrictions affecting voting rights or the that the Executive Board of JOIKEN PT AG must comprise at transfer of shares. least two members. In the absence of a required Executive Board member, in urgent cases the court must appoint a mem- 3. Direct or indirect participations in the share capital exceeding ber on the application of a stakeholder (Sect. 85 Para. 1 Clause 10 percent of the voting rights 1 of the Stock Corporation Act). The Supervisory Board can On February 25, 2008, JOIKEN PT AG was informed that ECE appoint a Chairman or a Spokesman of the Executive Board Industriebeteiligungen GmbH, Vienna, holds 25.02 percent of (Sect. 84, Para. 2 of the Stock Corporation Act, Sect. 6 Para. 2 the voting rights in JOIKEN PT AG and that ECE European City Clause 2 of the Articles of Association). Estates GmbH, Hinterbrühl, and the Humer Private Foundation, Vienna, are indirect shareholders via ECE Industriebeteiligungen In accordance with Sect. 179 Para. 1 Clause 1 of the Stock Cor- GmbH. poration Act, changes to the content of the Articles of Associa-

JO EN PTIK 2010 43 g roup management Report Business and framework conditions

tion are passed by the Annual General Meeting. However, authorized capital, nor exceed a total of 10 percent of the changes to the Articles of Association concerning only their for- nominal capital in existence as of the date of issue of the mulation can be passed by the Supervisory Board in accordance new shares, and the issue price of new shares does not fall with Sect. 179 Para. 1 Clause 2 of the Stock Corporation Act significantly below the stock exchange price; and Sect. 28 of the Articles of Association. This also includes (d) for the issue to employees of the company and in compa- the corresponding modification ofS ect. 4 Para. 5 of the Articles nies in which Jenoptik has a majority participation. The Exec- of Association on utilization of the authorized capital. In accor- utive Board, with the consent of the Supervisory Board, dance with Sect. 24 Para. 1 of the Articles of Association, reso- decides on the details of the issue of new shares, in particular lutions at the Annual General Meeting require a simple majority their conditions and the content of rights of the new shares. of votes cast unless the law provides otherwise. In cases in which the law requires a majority of the nominal capital repre- The nominal capital of the company is conditionally increased sented for a resolution to be passed, a simple majority of the by up to 23,400,000 euros by issuing up to 9,000,000 new no- nominal capital represented is sufficient, unless the law pro- par value bearer shares (Conditional Capital 2009). The condi- vides otherwise. tional capital increase will only be executed to the extent that • the creditors / owner of option certificates or conversion 7. Authority of the Executive Board to issue and buy back shares rights issued by the company or a domestic or foreign incor- The Executive Board is authorized until May 30, 2015, with the porated company in which the company has a direct or indi- consent of the Supervisory Board, to increase the nominal capi- rect majority stake, pursuant to the resolution of the Annual tal of the company by up to 35,000,000 euros through one or General Meeting on June 3, 2009 to May 30, 2014 exercise several issues of new, no-par value bearer shares against cash their options or conversion rights, and / or and / or non-cash contributions (“Authorized Capital 2010”). • the creditors of the issued convertible bonds obliged to exer- The new shares may be acquired by one or several credit insti- cise their conversion rights which were issued by the com- tutions, under the obligation to offer them to shareholders pany or a domestic or foreign incorporated company in (indirect subscription right). The Executive Board is authorized, which the company has a direct or indirect majority stake, on with the approval of the Supervisory Board, to exclude the sub- the basis of the resolution of the Annual General Meeting on scription rights of shareholders June 3, 2009, fulfill their conversion rights by May 30, 2014, (a) for fractional amounts; • and neither own shares are used, nor is payment made in (b) in the event of capital increases against non-cash contribu- cash. The new shares participate in profits from the start of tions, particularly also in the context of corporate mergers the fiscal year in which, at the time of their issue, no resolu- or for the acquisition of companies, parts of companies or tion by the Annual General Meeting on the appropriation of participations in companies; profits has been reached. TheE xecutive Board is authorized (c) in the event of capital increases against cash contributions, to set further details regarding the issue and terms of the to the extent that the portion of the nominal capital attrib- convertible bonds and option bonds and the execution of the utable to the new shares, taking into account resolutions at conditional increase in capital. the Annual General Meeting and / or the utilization of other authorizations to exclude the subscription right in direct or Under a resolution passed by the Annual General Meeting on indirect application of Sect. 186 Para. 3 Clause 4 of the June 9, 2010, the Executive Board is authorized to purchase Stock Corporation Act since the time of such authorization own no-par value bearer shares not exceeding a proportion of becoming effective, does neither exceed a total of 10 per- 10 percent of the nominal capital for purposes other than trad- cent of the nominal capital as of the date of registering such ing in its own shares until May 31, 2015. The treasury shares

44 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

purchased, together with shares that the company has already amount corresponding to their share of the loan. However, a s r de purchased and still owns (including shares to be attributed in change of control only applies if one or more persons acting in l o h e accordance with Sect. 71a et seq. of the Stock Corporation concert, with the exception of the existing main shareholders r a

Act), may not account for more than ten percent of the capital on the date the contract is concluded, acquire more than e sh h t stock. The authorization may be exercised in whole or in part, 50 percent of the outstanding nominal capital or voting rights or f on a one-off or repeat basis, for one or more purposes by the directly or indirectly at any time. company or by its Group companies or by third parties for its or

their account. At the decision of the Executive Board, acquisi- There is a framework agreement with one joint venture partner INFORMATION tion is by purchase on the stock exchange or by means of a which grants Jenoptik direct access to a comprehensive basis of public offer. Further details regarding the buyback of shares are patents, technological know-how and components that the given in the publicly-accessible invitation to the General Meet- partner possesses in the field of fiber laser development and

ing 2010 on our website at www.jenoptik.com, in the category manufacture and which contains the special agreements ment report e Investors / Annual General Meeting. described below: insofar as a change of control in a competitor g of the joint venture partner takes place within a specific period, 8. Key agreements for the event of a change of control result- Jenoptik’s right of use is limited to the manufacture and distri-

ing from a takeover bid bution of the product portfolio manufactured with the help of Group mana There are clauses which apply in the event of a change of con- the rights of use granted at the date on which the change of trol in the shareholder structure of JOIKEN PT AG as the result of control takes effect. The right granted to Jenoptik for a specific a takeover bid in respect of a joint venture agreement and of period to purchase components expires at the end of a transi- various financing agreements with a utilized total volume of tional period. approx. 91.4 million euros. The conditions for the acceptance of a change of control differ 9. Compensation agreements by the company with Executive in the respective loan agreements. In any event, contracts with Board members or employees in the event of a takeover bid a total volume used of 89.1 million euros provide the lender Agreements which are covered by the conditions of a change with a special right of termination should the threshold of of control and meet the criteria of material relevance have been 30 percent for the submission of a takeover bid under Sect. 29 concluded with both members of the Executive Board in the Para. 2, Sect. 35 Para. 1, Para. 2 of the WÜGp (Securities Acqui- event that they terminate their contract of service as a result of sition and Takeover Act) be reached, in some cases however a change of control through acquisition of at least 30 percent once a shareholding in excess of 25 percent is reached. of voting rights by a third party. The compensation agreements contained within the contracts of service include payment of Four further financing agreements of which 2.3 million euros had the contracts for the regular remaining contract period and been used as of December 31, 2010, only entail a disclosure compensation for the bonus calculated as an average value. obligation to the bank on the part of JOIKEN PT AG in the event The compensation is limited to a maximum of three annual sal- of a change of control. If this notification leads to an increase in aries. In addition, in the event of voluntary resignation due to a the assessment of the risk by the bank then, two of these finan change of control, both members of the Executive Board will cing agreements entitle the bank to request the deposit of secu- receive a contractually vested right to their benefits if they con- rity collaterals or that the existing collaterals be increased. tinue to pay their contributions until the regular end of each of their contracts for services (but for a maximum of three years). For the debenture loan with a total sum of 4 million euros, the There are no similar agreements with employees of the com- lenders have the right to special termination of the loan in the pany.

JO EN PTIK 2010 45 g roup management Report Business and framework conditions

1.2 corporate management, srati t eg c guidelines targets and strategy All strategic measures and projects are geared towards the five value levers that have defined the areas of the Group’s further development since 2007: 10 Jenoptik takes a consistent market and customer oriented approach. As a technology-based company, we place customer Organic growth: Based on a clear market focus, developments benefit at the heart of our products and solutions. Technology of new products and technologies and further developments of is not an end in itself. By pursuing a policy of active portfolio existing ones are the focus of the development work in the management, we are focusing the Group on attractive markets Jenoptik Group. Innovations also include new business models, and by so doing are improving the opportunities for profitable e. g. those we offer in the traffic safety area. The focus of this growth. Having withdrawn from activities which no longer value lever is our rolling strategy process and the group-wide form part of the strategic core themes in the fiscal year 2008, uniformly structured innovation management, which systemati- the focus in 2009 was on managing the global financial and cally guides the best ideas to commercial success in a multi- economic crisis. At the same time, we have pressed ahead with stage process. our internationalization and optimized our processes. Both topics were a focus of the Group’s long-term strategic develop- Market and customer-oriented approach: The divisional organi- ment also in 2010. zation introduced in 2008 is proving its worth. We operate as an integrated and major specialist for our customers’ corresponding matters. This was underpinned by the introduction of the global, uniform umbrella brand at the beginning of Janu- ary 2009; a uniform website went online in March 2010. We are working hard on positioning our brand in such a way that it

10 v alue levers

•gani Or c growth through market development, market penetration and product innovations.

• Market and customer-oriented approach by expanding distribution and marketing activities and focusing internal processes on customers and markets.

• Internationalization by systematically developing foreign markets, particularly in North America and Asia.

• Employees & management by challenging and encouraging employees and managers through a holistic system of performance management.

• Operational excellence by examining all the company’s processes in order to improve them and generate cost savings.

46 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

meets the requirements of the divisions’ various business activi- year, the focus remains on process harmonization and imple- s r de ties while simultaneously conveying a clear image of the mentation of lean concepts. Where tasks and processes are the l o h e Jenoptik brand. The introduction of standardized customer rela- same across all divisions and can be structured more efficiently r a

tionship management programs began in 2010. through amalgamation, they are integrated within the Shared e sh h t Service Center. This enables the divisions to concentrate on or f Internationalization: The divisions utilize existing structures in their core tasks; synergy effects can be achieved throughout the corresponding country for new internationalization proj- the Group both in terms of cost optimization as well as

ects. If Jenoptik does not currently have an active presence in enhancing quality. INFORMATION the target market, the new structures are established in such a way that they can also be used by other divisions in future. Our Control system and control indicators presence in the key core markets is being coordinated simulta- The control system of the Group corresponds to the organiza-

neously across all divisions. In 2010, we primarily strengthened tional structure. Four forecasts are produced during the course ment report e our global footprint in Asia. A new laser application center was of a fiscal year. The segments and the divisions are subject to a g opened in Korea, together with our longstanding partner we monthly assessment based on the data provided on sales, EBT I , established a joint venture company with a Jenoptik majority order book situation, working capital, development of cash interest in Japan and in China we consolidated our presence in flow, investment volume as well as other liquidity and profit- Group mana new premises. ability figures, by comparison with the targets and forecasts during the course of one year. Quality-related factors such as Employees & management: Our positioning as an attractive customer relationships, projects, the situation regarding com- employer and the loyalty of our employees to the company are petitors as well as other early warning indicators are also dis- key aspects of our strategic personnel work. In coming years, cussed on a monthly basis on the business unit level. personnel development and support will form the strategic areas of focus for the work of the HR department. In our aim Strategy meetings are also held between the Executive Board to attract new employees, the demographic change and the and Heads of Division twice a year, in particular to assess stra- waning enthusiasm amongst young people for careers in scien- tegic targets and the business development of the segments, tific fields pose challenges that we will have to tackle over the the divisions as well as the individual business units – i.e. down long-term. In the last two years, Jenoptik has established itself to the third level of organization. Strategic decisions for the as an attractive employer brand in the rankings for the first Group as a whole are taken by the Executive Management time. Board (EMB see page 180), which met five times in 2010 and also holds extraordinary meetings to deal with special and Operational excellence: The Jenoptik Excellence Program (JP E ) important events. All Group projects are monitored and evalu- started in February 2009 and represents a sustainable contribu- ated on a monthly basis in a project management tool. tion to reducing costs and optimizing processes. In 2010, these objectives were pursued in a total of 37 projects. In the current

JO EN PTIK 2010 47 g roup management Report Business and framework conditions

1.3 development of the economy as a ery remained moderate in the US A as a whole, mainly as a whole and of the sectors result of high public debt and unemployment as well as the still vulnerable real estate sector.

D evelopment of the economy as a whole The course of economic development in the euro area was het- After the record decline in 2009, the global economy recovered erogeneous in 2010. A rise in economic output within the euro strongly in 2010, even if the level of the years prior to the crisis area by an estimated 1.7 percent was cancelled out as a whole by was not regained. According to the current economic outlook high public debt in a number of member states. As a result, the by the International Monetary Fund (IMF), economic output in euro area continues to remain behind the US A and Japan. 11 2010 increased by 4.8 percent. Growth in O Ecd industrialized countries was at 2.8 percent, following a decline of 3.4 percent In 2010 Germany recorded its strongest economic growth since in 2009. The economic recovery in the first half-year 2010 was reunification. With a rise in gross domestic product (GP D ) calcu- followed by a slight slowdown at the end of the year. The rea- lated by the O Ecd at 3.5 percent, Germany is Europe’s eco- sons for this are a tailing-off of stimuli from government economic driver. However, following a fall in GP D by 4.7 percent in nomic programs as well as more moderate growth rates in 2009, 2010 was primarily characterized by catch-up effects. emerging Asian and Latin American markets. The rise in prices Exports were first and foremost responsible for the upswing, for raw materials is a risk factor for the global economy: with increasing consumer spending also playing a role toward according to the Hamburg Institute of International Economics, the end of the year. In the second half of the year, the recovery the commodity price index rose by around 30 percent in 2010 weakened somewhat following a strong 1st half-year. Accord- due to heavy demand in the context of the economic recovery ing to the Federal Statistical Office, capital expenditure on and the squeeze on available resources. equipment rose by 9.4 percent in 2010, exports by 14.2 percent. In November the number of unemployed people fell to According to O Ecd forecasts, the US economy remained just under three million for the first time in 19 years. In terms of under the average of O Ecd countries with a rise in economic annual average, the unemployment rate in Germany was output of 2.7 percent. Although economic momentum has 7.7 percent, compared with 8.2 percent in the previous year. again increased since the 3rd quarter of 2010, economic recov-

11 CHNG A E IN GROSS DOMESTIC PRODUCT (in percent)

2008 2009 2010 1) 2011 1) 2012 1) OECD countries 0.3 – 3.4 2.8 2.3 2.8 UAS 0.0 – 2.6 2.7 2.2 3.1 Euro area 0.3 – 4.1 1.7 1.7 2.0

Source: OECD Economic Outlook No. 88 / 2010 | 1) 2010 – 2012 = forecasts

48 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Japan’s similarly export-driven economy saw no sustainable Development of the individual Jenoptik sectors s r de upswing in 2010. The O Ecd estimates GP D growth of 3.7 per- In the past year the optical technologies sector has overcome l o h

st e cent in 2010 as a result of catch-up effects following the decline the slump of 2009. Since the all-time low in the 1 quarter of r a

of 5.2 percent in 2009. The upward revaluation of the yen to the 2009, the Spectaris world market index for optical technologies e sh h t US A dollar and deflation particularly dampened the economic rose in every following quarter and achieved an all-time high or f recovery. In addition, in 2010 Japan lost its status as the second- with 201.8 points in the 3rd quarter of 2010. Based on this largest national economy in the world after the US A to China. good development, the Spectaris professional association fore-

cast total sales of 21.2 billion euros in 2010, which corresponds INFORMATION Outside the O Ecd area, China was primarily seen as a trendset- to an increase of 15.2 percent over the previous year. 12 ter. According to O Ecd estimates, the Chinese economy grew by 10.5 percent in 2010. This high rate of growth was primarily The global market for laser technologies recovered strongly in

the result of government economic stimulus programs, very 2010. According to the market assessment by Laser Focus ment report e high levels of lending and strong domestic demand. The People’s World (LFW), total sales in the global laser market rose by g Republic was also Germany’s most important supplier in 2010 – approx. 27 percent to 6.4 billion US dollars, thereby almost off- almost ten percent of German imports came from China. setting the decline of the past two years. The laser material

processing sector reported an increase in sales of around Group mana India is showing similarly high rates of growth to China. For 20 percent in 2010, resulting in global sales of industrial lasers 2010, the O Ecd forecast an increase in economic output of of 2.2 billion US dollars. The reasons for this growth, according 9.1 percent, this being primarily due to domestic demand. A to LFW, are the high demand for industrial lasers in China and further driver of growth in the world economy was Brazil. With the increasing success of diode-pumped solid state and fiber an increase in GP D of 7.5 percent calculated by the O Ecd, Bra- lasers, in particular in the automotive and automotive supplier zil was a trailblazer among Latin American emerging markets industry. However, according to an analysis by LFW, the market and thereby overcame the economic stagnation of 2009 (minus for medical lasers remained below the sector average and rose 0.2 percent). Of the so-called BI R C countries (Brazil, Russia, by 7 percent to 432 million US dollars in 2010. In the military India, China), only Russia was unable to keep up with the pace lasers sector, sales in 2010 came to 188.9 million US dollars, of economic recovery: following a fall in GP D of 7.9 percent in almost 16 percent more than in 2009. 13 2009, Russian GP D was estimated by the O Ecd to grow by 3.7 percent in 2010.

12 Mrkora et f the German optical, medical and Lae s rs: global sales (in billion US dollars) 13 mechatronic industry (in billion euros) 10 20 30 40 50 1.0 2.0 3.0 4.0 5.0 6.0 7.0

2010 1) 41.0 2011 1) 7.0

2009 35.6 2010 1) 6.4

2008 41.6 2009 5.0

2007 39.8 2008 6.5

2007 6.8

Source: Sector Report 2010, September 2010 | 1) Forecast: plus 15 percent on 2009 Source: Laser Focus World, January 2011 | 1) 2010 – 2011 = forecast

JO EN PTIK 2010 49 g roup management Report Business and framework conditions

The semiconductor industry was one of the first sectors to report, the market share of thin-film technologies was only overcome the recession. According to figures from theS emi- around 20 percent in 2010. As silicon prices fell in 2010 to conductor Industry Association (A)SI , the sector ended the year around one tenth of their level two years ago, crystalline manu- 2010 with record sales. In comparison with 2009, global sales facturers were able to reduce their module prices. rose by 31.8 percent to 298.3 billion US dollars. According to the SA,I this was primarily due to semiconductor technology According to AMA Association for Sensor Technology, sensor being used in ever-increasing numbers of electronic devices. technology and metrology are on an upward trend. Since the 2010 was the strongest year to date for semiconductor suppli- sales trough in the 2nd quarter of 2009, sales have been ers, in which, according to analysts at Gartner, sales came to a increasing steadily. The year 2010 began very strongly with total of 38.4 billion US dollars. This represents an increase of 25 percent growth in the 1st quarter compared with the previ- 131 percent compared to 2009 (16.6 billion US dollars). 14 ous quarter, albeit based on a low starting level. As a whole, the AMA calculated a full-year increase in sales of 37 percent In 2010, the photovoltaic market experienced an unexpectedly for 2010. However, this recovery takes place with some delay – strong boom. According to the market researchers at iSuppli, some branches of industry, such as suppliers for mechanical new solar collectors with a total output of 16 gigawatts were engineering, are still lagging behind the trend. installed around the world in 2010. Benefitting from government solar subsidies, Germany saw new installations with over Since the end of 2009, the medical technology sector has also 7 gigawatts in 2010, as estimated by the German Solar Indus- been on a clear upward trend. After a decline in total sales by try Association. This approximately amounts to a doubling of 4.3 percent to 18.3 billion euros in 2009, the first half-year 2009 figures.S ales of photovoltaic equipment suppliers rose 2010 primarily saw a rally in foreign business. Exports to Asia, accordingly to 10.7 billion US dollars according to the market in particular, rose by 30 percent according to the Spectaris pro- research company Solarbuzz. However, there is strong pressure fessional association. As a whole, Spectaris is expecting an on prices and Europe is beginning to play a smaller role. Suppli- increase in sales of just under 10 percent to 20 billion euros in ers from China, Taiwan and South East Asia accounted for 2010. 85 percent of sales from the manufacture of crystalline silicon modules and 50 percent of sales for thin-film modules in 2010. In 2010, the German machine and plant construction industry According to figures in the S“ olar Photovoltaic Technology” managed a rapid about-face following the record decline

14 Sinem co ductor: global sales (in billion US dollars)

50 100 150 200 250 300

2010 298.3

2009 226.3

2008 248.6

2007 255.6

Source: SIA, January 2011

50 JO EN PTIK 2010 INFORMATION for the shareholders Business and framework conditions Group management report consolidated financial statements Notes to the consolidated financial statements additional information

caused by the crisis in 2009. In May and June 2010, the growth sis have not yet been regained. In the automotive components s r de rates in incoming orders were more than 60 percent above industry, the feared consolidation failed to materialize accord- l o h e those for the same period in the previous year. The German ing to auditor Deloitte, but pressure on prices further increased, r a

Engineering Federation (DA)V M therefore steadily raised its especially for volume-based suppliers. e sh h t forecast during the course of the year from an initial “break- or f even” and now expects growth in mechanical production of The traffic monitoring sector continued to show positive per- 8.8 percent in 2010. The sector’s annual sales rose from formance in 2010. The saturated markets, primarily in Western

161 billion to 174 billion euros. Key stimuli came from abroad, Europe and North America, are still focused on upgrading to INFORMATION particularly China, India and Brazil. At the end of 2010, a new technologies. New markets are primarily opening up in the strong order increase could again be reported, in both domes- sector in emerging markets, which are increasingly focused on tic and foreign business. According to the VDA M , orders in the major projects facilitated by national programs.

sector were 36 percent higher in 2010 than the previous year. ment report e The international aviation industry also recovered more strongly g The global automotive market recovered faster than expected than initially expected in 2010. Although the International Air in 2010. With 61.7 million vehicles, 12 percent more were sold Transport Association (IATA) originally expected annual losses of globally than in 2009, as the German Association of the Auto- 2.8 billion US dollars, by September 2010 it was forecasting net Group mana motive Industry (D)V A reported. There were new registrations profits of 8.9 billionUS dollars. This forecast was then increased for 2.92 million passenger vehicles in Germany. Following the again to 15.1 billion US dollars net profit for 2010 and total ending of government subsidies, the figures are slowly settling sales of 565 billion US dollars. According to the IATA, this was down again to a normal level. German suppliers primarily primarily due to an exceptionally strong 3rd quarter 2010 as recovered as a result of strong demand from abroad. Foreign well as growth in passenger airlines business. For aircraft manu- orders increased by a fifth in 2010, and exports also rose by facturers, 2010 was a very successful year: Airbus recorded 510 almost a quarter to approx. 4.2 passenger vehicles. German deliveries and, with 574 orders, more than twice as many as manufacturers also set a positive trend on the North American 2009 (271). The ESAD subsidiary therefore left its competitor light vehicles market: according to the VD, A they sold 11.6 mil- Boeing, with 530 orders and 462 deliveries on its books, trail- lion vehicles in 2010, 11 percent more than in the previous ing behind again. year. However, the peak figures from the years prior to the cri-

JO EN PTIK 2010 51 g roup management Report Business and framework conditions

In the area of security and defense technology, 2010 was again Against the backdrop of a challenging economic environment, marked by stable development. According to the Stockholm we have made real progress in the strategic development of International Peace Research Institute Sipri, the global eco- Jenoptik over the last two years. We have reduced our costs nomic crisis had no immediate impact on armaments expendi- and improved our processes. As the statements below on the ture, predominantly the subject of long-term plans and proj- earnings, finance and asset position show, we have not yet ects. Global military spending in 2009 rose to 1.6 billion attained our objectives and must continue to work consistently US dollars according to Sipri, 6 percent higher than in 2008 and on the relevant issues to achieve our targets for the medium almost 50 percent higher than in 2000. The US A was a primary and long term. driver of this development: its share of global military spending in 2009, according to Sipri, was 43 percent, followed by China with 6.6 percent. For 2010, the analysts at Frost & Sullivan estimated a slight drop in global military spending to 3.5 percent.

Summary | General statement on the framework conditions In 2010, the economy as a whole and the sectors of the Jenoptik Group recovered more quickly than we originally anticipated. The sharply rising demand from the semiconductor industry since the 2nd half-year 2009 proved sustainable in the course of 2010 and further improved. We have also seen a rapid recovery in the automotive industry, and with it the supplier industry, since spring 2010.

The economic upswing showed that being able to increase production quickly is important to meet rising demand. Com- mitted employees, flexibility, efficient processes, technological capability, products that meet customer requirements, market proximity and solid financial resources are key requirements for managing fluctuations in the business environment, now and in the future.

52 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

2 eARNINGs, financial and asset situation

Ac n tual a d forecast course of business upwards to approx. 50 million euros, including one-off effects s r de All forecasts for the 2010 fiscal year were met, some even primarily resulting from the sale of Jena-Optronik GmbH. 15 l o h e exceeded. In early 2010, there was still considerable uncer- r a

tainty surrounding forecasts, particularly with regard to the In addition to sales and EBT I key indicators, we also reported e sh h t further economic development. It was difficult to assess to on the planned development of additional key indicators, both or f what extent any recovery in specific sectors would arise or in quantitative and some in qualitative form. These include the continue in 2010. There was also uncertainty about the degree number of employees, RD + output, net debt, statements on

to which all cost reduction targets for 2010 could be achieved. the anticipated cash flow and investments. Here again we suc- INFORMATION In March 2010, we had initially forecast sales of between 475 cessfully achieved and in some cases exceeded our targets for and 500 million euros with a Group EBT I of between 15 and 25 the year 2010. million euros. Due to a faster than anticipated recovery in the

automotive and automotive supplier industries, in particular, On the subject of forecasting quality, according to a study pub- ment report e and the persistent high level of demand from the semiconduc- lished by the German investor journal Nebenwertejournal in g tor industry, we were able to put more precise figures on our mid January 2011, Jenoptik was placed amongst the top 24 forecasts and raise them in August 2010. From August 2010, companies. The study evaluated the forecasting quality for the

we had forecast sales of around 500 million euros with a 2010 fiscal year based on the third quarter figures. Group mana Group EBT I of at least 25 million euros. With the completion of the sale of Jena-Optronik GmbH at the beginning of Decem- The comparison between the actual and forecast course of ber 2010, our forecast for the Group EBT I was again revised business is based on the figures for the whole Group, including

15 Ac n tual a d forecast course of business (in million euros)

Status as at Forecast March 2010 Status as at Explanation Parameter end 2009 as against 2009 Change in forecast during year end 2010 on page Sales 473.6 475 – 500 approx. 500 (9.8.2010) 510.6 54 Lasers & Optical Systems 166.7 Slight increase Stronger growth 188.9 79 Metrology 96.0 Stable Slight increase 113.8 83 Defense & Civil Systems 205.3 Stable at previous year’s level Stable 205.8 86 Group ETBI 7.8 1) 15 – 25 Minimum 25 (9.8.2010) 31.9 1) Including one – off effects of 55 approx. 50m euros (6.12.2010) 56.4 2) Investment result – 4.3 No details – 2.0 56 Interest result – 10.4 Weaker – 12.0 56 Marked double digit Cash flow from operating activities 53.3 million euro amount 43.4 71 Net debt 159.5 No details Lower (23.6.2010) 79.3 69 Employees 3.268 approx. 3,000 2.951 61 F + E costs 51.5 Previous year’s level 51.4 59 Situation – related as per Capex 14.4 development of business 15.3 70

1) Before one-off effects 2) After one-off effects

JO EN PTIK 2010 53 g roup management Report Earnings, financial and asset position

Jena-Optronik GmbH. All forecasts published at the beginning 2.1 earnings situation of and in mid 2010 included Jena-Optronik GmbH. The sale of Jena-Optronik GmbH to Astrium GmbH was completed on D evelopment of sales December 3, 2010. The company was deconsolidated as at At 510.6 million euros, the Jenoptik Group posted a 7.8 percent November 30, 2010, consequently – unless stated otherwise – increase in sales in 2010 (prev. year 473.6 million euros). the figures for Jena-Optronik GmbH are included in the details 59.8 percent, or 305.3 million euros were generated abroad below up to this date. As at December 31, 2010, Jena-Optronik (prev. year 57.3 percent or 271.6 million euros). In addition to GmbH is no longer included in the key indicators relating to the the European Union, North America, where Jenoptik also has balance sheet date, e. g. balance sheet data, order backlog and its own optical production capacities, was one of the key sales number of employees. regions. The growth in the foreign share of sales compared with the previous year was the result of a change in the sales mix. The share of sales generated with the semiconductor industry whose market recovery continued and picked up pace in 2010 was at 12.9 percent or 65.7 million euros in absolute terms including photovoltaics significantly higher than in 2009 (prev. year 7.3 percent or 34.8 million euros in absolute terms). Jenoptik supplies the semiconductor industry almost exclusively abroad. One of Jenoptik’s largest markets is security and defense technology, which accounted for approx. 24 percent of total sales in 2010 (prev. year 28.4 percent). At 122.5 million euros, the sales volume in absolute terms came in below the level for the previous year (prev. year 134.5 million euros). Sales in the sum of 31.9 million euros generated by Jena-Optronik GmbH which was sold in December 2010 are included up to November 30, 2010. The adjusted figure for Group sales 2010 was 478.7 million euros. 16 17

16 s ales by target market

Markets (in million euros and % of total sales) 2010 2009 Aviation and aerospace / traffic 134.9 26.4 % 116.0 24.5 % Security and defense technology 122.5 24.0 % 134.5 28.4 % Automotive / machine construction 107.5 21.1 % 96.8 20.4 % Semiconductor industry / photovoltaics 65.7 12.9 % 34.7 7.3 % Medical technology 32.8 6.4 % 45.4 9.6 % Other / consolidation / real estate 47.2 9.2 % 46.2 9.8 % Total 510.6 100 % 473.6 100 %

54 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

The growth in sales was attributable to the Lasers & Optical as well as from the sale of the 15 percent stake in caverion s r de Systems and Metrology segments and came primarily from the GmbH to the Finnish YIT Group. The Group EBT I , including the l o h e semiconductor industry, the automotive and automotive sup- contributions to the operating result from Jena-Optronik GmbH r a

plier industry as well as traffic safety.W hilst the demand from in the sum of 2.9 million euros, came in at 31.9 million euros e sh h t the semiconductor industry had already risen in 2009 and in (prev. year 7.8 million euros). The group operating result exclud- or f the full year 2010 resulted in a markedly higher level of sales, ing the operating earnings contribution from Jena-Optronik the automotive industry started recovering from early 2010 and was 29.0 million euros. 19

contributed to a marked rise in sales in the Metrology segment, INFORMATION particularly in the 2nd half-year. This segment’s sales in the All three segments of the Jenoptik Group contributed towards 3rd quarter were positively influenced by the settlement of a the positive development of the operating result. The Lasers & major order in the TrafficS olutions division. The Defense & Civil Optical Systems segment reported a leap in earnings mainly

Systems segment reported stable sales. The sales of 2.1 million due to the growth in sales from the semiconductor industry. ment report e euros from non-operational Other (Jenoptik Holding, real estate The diode and medical lasers as well as laser processing sys- g and consolidation) mainly comprised rental sales with third par- tems for the automotive industry also made positive contribu- ties (prev. year 5.6 million euros). The reduction compared with tions to earnings. Jenoptik achieved the turnaround in the

the previous year was not the result of lower rental sales but Metrology segment where in the 2nd half-year the earnings of Group mana higher sales between the segments which are deducted here in the Industrial Metrology moved back into positive territory the form of consolidation. More information on the develop- quicker than had been anticipated, with the division conse- ment of sales by the segments can be found in the Segment quently posting a small positive result on a year-on-year basis. Reporting from page 79. 18 In the TrafficS olutions division, a major order issued at the beginning of the year and accounted for in full in the 3rd quar- D evelopment of earnings ter 2010 made a special contribution to the improvement in Including all one-off effects, the Jenoptik Group posted a group earnings. In the Defense & Civil Systems segment, the segment operating result in the sum of 56.4 million euros in 2010 (prev. EBT I reflected the development in sales and was virtually at the year minus 19.6 million euros). This figure includes one-off same level as in the previous year. For detailed information on effects, primarily arising from the sale of Jena-Optronik GmbH the development of the results of the segments see the Seg- in December 2010 to Astrium GmbH, an ESAD Group company, ment Reporting from page 79.

17 Sa les (in million euros) Sa les by segment (in million euros) 18

Change Change 2010 2009 in % 2010 2009 in % Group 510.6 473.6 7.8 Group 510.6 473.6 7.8 Domestic 205.3 202.0 1.6 Lasers & Optical Systems 188.9 166.7 13.3 Foreign 305.3 271.6 12.4 Metrology 113.8 96.0 18.5 Defense & Civil Systems 205.8 205.3 0.2 Other 2.1 5.6 – 62.5

JO EN PTIK 2010 55 g roup management Report Earnings, financial and asset position

Group earnings before interest, taxes, depreciation and amor Income taxes totaled 1.3 million euros (prev. year 0.2 million tization (BT)E I DA came in at 88.7 million euros (prev. year euros) in 2010. These were incurred primarily on the domestic 23.4 million euros). After adjustment for one-off effects, in par- side, with Jenoptik in Germany benefiting from the existing ticular those arising from proceeds of sales, the group operat- losses carried forward of JOIKEN PT AG in the total sum of ing EBT I DA totaled 61.8 million euros (prev. year 43.1 million 430 million euros which can be utilized annually for 60 percent euros before one-off effects, in particular arising from restruc- of the taxable income. Deferred taxes totaled 4.7 million euros turing). The Group EBT I DA excluding Jena-Optronik GmbH (prev. year minus 0.7 million euros). In 2010 the effective totaled 57.7 million euros. 20 overall Group tax quota was therefore 14.2 percent. Jenoptik posted overall earnings after tax in the sum of 36.5 million In 2010 the financial result improved slightly to minus 13.9 mil- euros (prev. year minus 33.9 million euros) in 2010. lion euros (prev. year minus 14.7 million euros). The key item in the investment result which improved from minus 4.3 million The share of external shareholders in earnings totaled minus euros to minus 2.0 million euros is JT Optical Engine GmbH & 0.1 million euros (prev. year 4.0 million euros), net profit there- Co KG, a joint venture with Trumpf. The investment result also fore reached 36.6 million euros. Earnings per share based on includes, in particular, write-downs on financial assets and the weighted number of 56.3 million shares were 65 cents dividend payments by minority investment holdings. As (prev. year minus 73 cents / with 52.0 million shares issued) expected, the interest result was down slightly due to the fig- since the capital increase in 2010 took place during the course ure in the previous year being characterized by a higher pro of the year. portion of current liabilities at low interest rates prior to the changeover of the group financing in autumn 2009. In 2010 Order book situation interest expenses in the sum of 13.7 million euros (prev. year In 2010, Jenoptik succeeded in increasing its order intake by 13.1 million euros) are offset by interest income in the sum of 34.6 percent to 582.5 million euros (prev. year 432.8 million 1.8 million euros (prev. year 2.7 million euros). euros). Contributory factors were the positive economic development in the overall economy and key target sectors, the As a result of the marked improvement in the Group operating attractive portfolio of services plus a series of major orders. The result and an improved financial result, in 2010 Jenoptik posted book-to-bill rate (the ratio between order intake and sales for earnings before tax of 42.5 million euros (prev. year minus the fiscal year) was 1.1. The order intake includes order intakes 34.3 million euros).

19 EB IT (in million euros) EBT I DA (in million euros) 20

Change Change 2010 2009 in % 2010 2009 in % Group 56.4 – 19.6 + + Group 61.8 43.1 43.4 Lasers & Optical Systems 13.3 – 16.5 + + Lasers & Optical Systems 24.0 15.5 54.8 metrology 8.6 – 14.6 + + Metrology 12.1 – 0.3 + + defense & Civil Systems 11.5 12.2 – 5.7 defense & Civil Systems 19.0 21.3 – 10.8 Other 23.0 – 0.7 + + Other 6.7 6.6 1.5

56 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

of Jena-Optronik; after adjustment this gives a 2010 order At the end of 2010, the Jenoptik Group reported an order s r de intake for the Jenoptik Group of 534.6 million euros. 21 backlog of 355.4 million euros (prev. year 339.4 million euros). l o h e By contrast to the order intake, the order backlog of Jena- r a

All three segments achieved double figure percentage increases Optronik GmbH was no longer included as at December 31, e sh h t in their order intakes. The Lasers & Optical Systems segment 2010 due to the balance sheet date. In the previous year this or f saw the high demand from the semiconductor industry main- figure was 35.4 million euros. Around 65 percent of the order tained. The medical lasers business reported one of the largest backlog will result in sales in the current 2011 fiscal year. Some

orders in the company’s history at nearly 12 million euros. In of the remaining 35 percent will extend to the year 2017 INFORMATION the Metrology segment, a rapid recovery in demand from the mainly due to the very long-term orders in the Defense & Civil automotive industry in the Industrial Metrology division, as well Systems segment. 22 as a major foreign order in the Traffic Solutions division for

12 million euros, led to a marked increase in orders compared D evelopment of key items ment report e with 2009. The Defense & Civil Systems segment posted an in the statement of income g 18.9 percent rise in its order intake with the help of several The items in the statement of income essentially increased – major orders in the fiscal year just past. More detailed informa- reflecting the expansion of business in 2010 – albeit generally

tion on the order intakes of the segments can be found in the at a lower rate in proportion to the increase in sales. The fig- Group mana Segment Reporting from page 79. ures for Jena-Optronik GmbH are included on a proportional basis up to its deconsolidation on November 30, 2010. 23

21 Oentakrd r i e (in million euros)

2010 2010 2009 Change in % Book-to-Bill-Ratio Group 582.5 432.8 34.6 1.14 Lasers & Optical Systems 230.2 168.4 36.7 1.22 Metrology 137.0 83.2 64.7 1.20 Defense & Civil Systems 211.6 178.0 18.9 1.03 Other 3.7 3.2 15.6 n. a.

22 Oeb rd r acklog (in million euros)

2010 2009 Change in % Group 355.4 339.4 4.7 Lasers & Optical Systems 98.8 59.9 64.9 Metrology 45.1 21.9 105.9 Defense & Civil Systems 212.6 260.2 – 18.3 1) other – 1.1 – 2.6 57.7

1) due to the sale of Jena Optronik GmbH

JO EN PTIK 2010 57 group management Report Earnings, financial and asset position

Cost of sales rose by 2.5 percent to 353.4 million euros in expected, is reflected in an increase in selling expenses. Higher accordance with the growth in sales. However, this rise was at commissions for dealers also contributed to a rise in selling a markedly lower rate in proportion to the 7.8 percent increase expenses since the growth in sales was mainly attributable to in sales. The cost reduction measures as well as the measures the higher exports. Marketing accounted for around 7 percent within the framework of the Jenoptik Excellence Program had a of the selling expenses (prev. year 9 percent or approx. 4.6 mil- positive effect in 2010. The cost of sales also included costs lion euros). arising from developments directly on behalf of customers in the total sum of 22.1 million euros, which reduced R + D There was also an increase in the general administrative expenses (prev. year 21.9 million euros). expenses, which totaled 38.1 million euros in 2010 (prev. year 36.5 million euros). Some short-time working in 2009 and The gross profit rose to 157.2 million euros (prev. year 128.7 profit sharing by the employees for the 2010 fiscal year contrib- million euros), reflecting the increase in sales and the propor- uted towards the rise in administrative costs. tionately lower rise in the cost of sales. The gross margin accordingly rose sharply to 30.8 percent (prev. year 27.2 per- Other operating income came in at 47.8 million euros (prev. cent); this was also attributable to a change in the sales mix. year 23.1 million euros). This figure includes the income from the sale of the caverion shareholding and of Jena-Optronik The overall R + D output remained at the same level as the pre- GmbH. Currency gains in the sum of 8.1 million euros plus vious year, whilst R + D expenses were lower. For detailed infor- other operating income from passing on costs and services as mation on R + D, we refer to page 59 of the Management well as income from subsidies are also included in the figure. Report. Other operating expenses totaled 26.1 million euros (prev. year Selling expenses increased in comparison with 2009 to 54.4 51.0 million euros). They are characterized by currency losses in million euros (prev. year 51.3 million euros) and consequently the sum of 6.8 million euros and also include depreciation on accounted for 10.7 percent of sales. The expansion of interna- assets in the sum of 5.5 million euros as well as expenses tional distribution is one of the Jenoptik Group’s strategic pro for reorganization and restructuring totaling 2.3 million euros jects. This has been consistently pursued since 2009 and as (prev. year 27.4 million euros). Details of other operating income and expenses are shown in the Notes under points 6 and 7.

23 Key items in the statement of income (in million euros)

2010 2009 Change in % Cost of sales 353.4 344.9 2.5 R + D expenses 30.0 32.6 – 8.0 Selling expenses 54.4 51.3 6.0 Administrative expenses 38.1 36.5 4.4 Other operating income 47.8 23.1 106.9 of which sale of Jena-Optronik GmbH 24.5 – Other operating expenses 26.1 51.0 – 48.8 of which one-off effects 2.3 27.4 – 91.6

58 JENOPTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

In 2010 RD + expenses totaled 30.0 million euros, consequently s

2.2 development of the key r de were 8.0 percent lower than in 2009 (prev. year 32.6 million l performance factors o h e euros). This figure no longer includes the RD + expenses of the r a

mid format camera business which was discontinued in 2009. e sh h t Reserh a c & Development The Group RD + ratio (based on the RD + expenses) reduced to or f As a technology group, Jenoptik sees Research & Development 5.9 percent, reflecting the increased sales volume (prev. year (RD + ) as an important element in its future entrepreneurial 6.9 percent). 25

capability, so this area is accorded a high level of importance. INFORMATION The focus of the developments is on the requirements of the The number of RD + employees fell by comparison with the customers for whom technology is becoming the lever for previous year to 312 (prev. year 491). The reason for this is on earning power. the one hand the sale of Jena-Optronik GmbH and to a lesser

extent the reduction in the number of employees from 2009 as ment report e Within the framework of central innovation management, well as the reassignment of RD + departments into others in g development projects in the Jenoptik Group pass through a conjunction with the overall optimization of the processes in multistage process during which they are subject to milestone the Group, consequently no direct comparison can be made

assessments. The Innovation Days in autumn form the highlight with the previous year. Group mana of each and every RD + fiscal year. In 2010, 3 projects out of a total 11 candidates were nominated for the Jenoptik Innovation The RD + expenses primarily comprise personnel costs, pur- Award. The winning project was the miniaturized green thin- chased services and material costs as well as depreciation on disk laser. 2010 innovations are listed in the Segment Reporting capitalized development themes. Investments in tangible assets from page 79 of this report together with descriptions of some. are comparatively minimal as these are essentially limited to the laboratories and the workstation equipment. The RD + The overall RD + output of the Jenoptik Group, including devel- expenses do not include the associated company JT Optical opments on behalf of customers plus capitalization adjusted for Engine which was included at equity in the investment result. write-downs, totaled 51.4 million euros (prev. year 51.5 million The figure also excludes the costs to be directly apportioned to euros). The RD + ratio based on the development costs was customer orders which are shown under cost of sales. These 10.0 percent (prev. year 11.0 percent) with development costs totaled 22.1 million euros in 2010 (prev. year 21.9 million remaining the same and sales higher. 24 euros).

24 RD + output 1) mby seg ent (in million euros) RDe + xp nses by segment 25

Change Change 2010 2009 in % 2010 2009 in % Group 51.4 51.5 – 0.2 Group 30.0 32.6 – 8.0 Lasers & Optical Systems 17.5 22.0 – 20.5 Lasers & Optical Systems 12.6 15.7 – 19.7 Metrology 12.4 11.9 4.2 Metrology 8.5 8.3 2.4 Defense & Civil Systems 21.5 2) 18.0 19.4 Defense & Civil Systems 9.0 9.0 0 Other 0.0 – 0.4 100 1) Other – 0.1 – 0.4 75.0

1) Total derived from R + D expenses and order-related developments, capitalized development costs less write-down 2) 16.3 million euros without Jena-Optronik GmbH

JO EN PTIK 2010 59 g roup management Report Earnings, financial and asset position

The capitalized development costs were at the same level as in Public subsidies from the states, federal government or the the previous year, totaling 4.9 million euros (prev. year 5.5 mil- EU for research projects totaled 3.1 million euros (prev. year lion euros). The write-down on the capitalization of develop- 2.1 million euros) in 2010, with joint projects accounting for a ment close to the market, including impairments, totaled significant portion of this.W ithin the framework of joint proj- 1.4 million euros (prev. year 9.4 million euros). The high figure ects, Jenoptik passes on individual orders to state or semi state- in the previous year was the result of write-downs in connec- owned research institutions or other companies in accordance tion with the relinquishment of a business. with the corresponding funding guidelines.

Jenoptik acquires research services and know-how both from In 2010, the Scientific Advisory Board of the Jenoptik Group its own resources as well as through cooperation with partners, met once. It discusses important technology matters and long- scientific institutions and buy-ins. In 2010, a total of 68 patents term trends and comprises representatives from scientific insti- were registered group-wide, significantly more than in 2009 tutions. The names of the members of the Scientific Advisory (prev. year 53). This does not include designs and utility patents Board are shown on page 181. and trademarks. Jenoptik lends intensive support to the perception and image of The Jenoptik Group’s key R + D partners, in addition to the the technologies relevant to it and is actively involved in numer- Friedrich-Schiller University and the Jena Institute of Applied ous sector and technology-oriented organizations. In 2010, the Sciences, include the Fraunhofer Institute for Applied Optics memberships were pooled at the overall group level. 26 and Precision Mechanics (IOF) Jena, the Leibnitz Ferdinand- Braun-Institute, Berlin, the Technical University Ilmenau, the Institute for Photonics Technologies Jena, the Rheinisch-West- fälische Technical University RWTH Aachen as well as the Fraun- hofer Institute for Laser Technology (I) LT also in Aachen.

26 Jeoik n pt ’s membership of committees and organizations (selection)

• bundesverband der Deutschen Luft- und Raumfahrtindustrie e.V. (BDLI) • Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V. • CDU Wirtschaftsrat e.V. • Optonet e.V. / CoOptics • Deutscher Industrieverband für optische, medizinische und mecha- • Semiconductor Equipment Materials International tronische Technologien e.V. (SPECTARIS) • Verband Deutscher Maschinen- und Anlagenbau e.V. (VDMA) • Deutsches Institut für Normung e.V. • Stifterverband für Deutsche Wissenschaft • European Optical Society • Verein Deutscher Ingenieure (VDI) • Europäische Technologieplattform Photonics 21 • Zentralverband Elektrotechnik und Elektronikindustrie (ZVEI) • International Society for Optical Engineering (SPIE)

60 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Emly p o ees & management other divisions where they were able to make up for the short- s r de The number of Jenoptik employees reduced to 2,951 ages of personnel. 28 l o h e (31.12.2009: 3,268) as at the year end. The reduction of 317 r a

or 9.7 percent of the workforce is mainly attributable to the There was only partial short-time working in 2010 and this was e sh h t personnel measures introduced in 2009 and to the sale of Jena- mostly for a limited period only. The Optical Systems division or f Optronik GmbH with its 128 employees. As at the balance and the SSC plus, up to October 2010, the Industrial Metrology sheet date of December 31, 2010, Jenoptik employed a total of division utilized short-time working. 29

316 personnel abroad (31.12.2009: 416). Here again, the INFORMATION reduction compared with the previous year is attributable to Personnel expenses in 2010 totaled 186.2 million euros (wages, the personnel measures introduced in 2009. 27 salaries, social security contributions, costs for retirement provision and restructuring costs) and were therefore down on

The interim employment companies set up in Germany as part the level in the previous year (prev. year 187.3 million euros). ment report e of the measures to reduce the number of personnel were In 2009, the figure included subsidies from short-time allow- g closed at the end of 2010. During this period, training mea- ances. Adjusted for costs for the personnel-related measures sures were initiated and implemented for the employees. These totaling 10.4 million euros, personnel expenses amounted to

measures included, for example, further training in the area of 193.1 million euros. In the fiscal year just past, personnel Group mana quality management, EDP or training activities on specific sub- expenses were reduced as a result of the fall in the number of jects. employees. This was partially offset by increased profit-sharing and higher wages under collective agreements. 30 In order to make up for the dynamics and volatilities in the order situation, a limited number of agency personnel were Sales per employee increased markedly to 174.4 TUE R per again hired in 2010, mainly in the Optical Systems and employee (prev. year 147.7 TUE R per employee) reflecting the Defense & Civil Systems divisions. At the end of 2010, the rise in sales and a simultaneous reduction in the number of Group employed a total of 90 agency personnel. In addition, employees. The personnel intensity, the ratio between person- employees were transferred within and between the divisions nel expenses and sales, fell accordingly to 36.5 percent (prev. to enable employees from the Group to carry out work in year 38.6 percent).

27 Emly p o ees as at December 31, (incl. trainees)

Total Domestic Foreign Change 2010 2009 in % 2010 2009 2010 2009 Group 2,951 3,268 – 9.7 2,635 2,852 316 416 Lasers & Optical Systems 1,234 1,284 – 3.9 1,106 1,171 128 113 Metrology 632 769 – 17.8 454 481 178 288 Defense & Civil Systems 931 1,077 – 13.6 921 1,062 10 15 Other 154 138 11.6 154 138 0 0

JO EN PTIK 2010 61 g roup management Report Earnings, financial and asset position

The employee structure in the Jenoptik Group showed a bal- will be Lean Management. Individual personnel development mea- anced picture in terms of age distribution. In Germany, 84 sures will also be carried out on the management and employee employees (prev. year 105 employees) took advantage of the levels. Further development on a target group-driven basis will be partial retirement models, with approx. 60 percent of these continued on a consistent basis in 2011 and is intended to be employees still being active (prev. year around 70 percent). The underpinned by Group platforms and succession planning. proportion of women in the Group in Germany is 27.1 percent and therefore at the same level as the previous year (prev. year Junior management. The Jenoptik Junior Leadership Program 27.2 percent). The sickness quota as at December 31, 2010 (J²P L ) is an important building block in personnel development was 3.73 percent (prev. year 3.61 percent). 31 and is used for the targeted development and promotion of potential leaders from among the Group’s own ranks. In 2010, In 2010, Jenoptik invested 1.4 million euros in employee edu- 16 3rd generation participants successfully completed the pro- cation and further training (prev. year 1.2 million euros), with gram. In 2011, a total of 17 participants from two additional 1,303 employees benefitting from this (prev. year 1,369). The generations will complete the program. The J²P L will also be focus of the further training activities in 2010 was also on the continued in 2011: the 6th and 7th generations will be starting subject of project management. A total of 166 employees and the program, involving a total of 21 participants. The aims are managers received training. The main area of training was in to provide uniform preparation for the junior leaders on their the Lasers & Optical Systems segment as well as the Corporate further career path, to develop a management structure within Center. In-depth knowledge of the management of complex the company and to promote networking. projects was taught, with a direct reference to the company being created by working on current projects. The project Training. At the beginning of the training year in August 2010, management training is intended to underpin a professional 30 new personnel started their training at the Group’s German project management system and promote clear structures in sites. As at December 31, 2010, a total of 128 young people the project organization so the Group can continue to respond (prev. year 137) were undergoing training throughout the Group. quickly and in a structured way to market and customer Training is provided primarily in the commercial and technical requirements. professions such as electronics engineers, micro technology and precision optic technicians as well as commercial personnel. In In 2011, further themes will be added to the personnel develop- spring and summer 2010, 32 trainees and four students of the ment measures on the group level. One focal area in this respect Career Academy successfully completed their training.

28 traryempo posts within the Group (in Germany) Srtimho -t e working within the Group (in Germany) 29

20 40 60 80 100 20 40 60 80 100 120

31.12.2010 86 31.12.2010 5

30.09.2010 88 30.09.2010 46

30.06.2010 75 30.06.2010 52

31.03.2010 33 31.03.2010 118

62 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

In Thuringia, the junior leaders received training in the optical, good skilled workers. It also is increasingly looking for appli- s r de precision mechanic, electronic and commercial professions in cants with profiles from the and for the international environ- l o h e conjunction with the Jena-based Training Center. In addition to ment. In this context, the US A and Asia play a particularly key r a

Schott JAEN er Glas GmbH and Carl Zeiss, Jena GmbHe J noptik role. e sh h t is the third shareholder in the Jena-based training facility. In or f addition to 13 trainees, two students from the Career Academy Employees attach ever-increasing importance to the subject of began their training. work-life balance. This requires a very good and flexible system

of childcare, something which is guaranteed at the Jena loca- INFORMATION In order to secure the next generation of academic personnel, tion by a childcare center close to the plant. Promoting healthy Jenoptik not only awards internships but also provides graduate and active employees is also important to Jenoptik. Various theses in the technical and commercial areas. The network platforms, such as e. g. the Healthcare Day in Jena have been

meetings in Thuringia, which have been held every six months started up for this purpose. ment report e since 2008, give the approx. 25 trainees and postgraduates at g the Thuringian locations the opportunity to meet together and Organization & production cycle share experiences. The divisions are responsible for the organization and produc-

tion cycle. Processes and organization therefore reflect the Group mana Recruitment. In order to attract potential technical and man- requirements of the respective division and are heterogeneous. agement personnel at an early stage, Jenoptik also works It was therefore decided not to issue any group-wide state- closely together with selected universities. The Group’s place- ments of a sufficiently relevant nature for the Group Manage- ments among the top employers are a reflection of its positive ment Report as it would only be possible to give sample proj- presence. For example, in the trendence barometer of gradu- ects and themes. A few of these can be found in the Segment ates, the Group ranked 82nd in the engineering sciences area, Reporting from page 79. and in the European rankings by the Universum Study Survey and the Wirtschaftswoche magazine 46th for natural sciences Within the framework of the Jenoptik Excellence Program, a and 117th for the engineering sciences. Within the area of number of production processes in the Group were also opti- recruitment, Jenoptik’s main focus of attention is on academics mized in 2010; these include the optics manufacturing at the from the natural and engineering sciences, economics and on Jena site. In 2010, preparations were also made for a group-

30 Comtionposi of the personnel expenses (in million euros) A rcge st u ture (in percent) 31

2010 in % 2010 2009 Wages and salaries 158.1 85.0 Over the age of 55 19.1 17.2 Social security contributions and costs for 30 to 55 65.5 68.8 retirement provision and support 28.1 15.0 Below the age of 30 15.4 14.0 Total 186.2 100.0

JO EN PTIK 2010 63 g roup management Report Earnings, financial and asset position

wide project designed to harmonize the business process land- fication audits in 2010. The Israeli joint ventureJOIK EN PT Opti- scape. This goes hand in hand with the objective of creating a Sys Ltd. was awarded its I SO 9001:2008 certification in more standardized ERP system to support these processes. The June 2010 and meets the requirements for the manufacture of business process cycle and the way in which this is depicted medical devices in accordance with I SO 13485:2003. In addi- currently vary in the segments as well as in individual areas of tion, the Massachusetts site of JOIKEN PT Optical Systems Inc. the segments and run on various ERP systems. The objective is was successfully re-certificated in accordance withI SO to standardize the basic processes and the way they are 9001:2008. In the Metrology segment, JOIKEN PT Robot GmbH depicted in an SAP system which is adapted to all areas of has been audited and certificated for the applications and Jenoptik but which does allow individual freedom for the implementation of the requirements under data protection leg- detailed requirements of the areas. The project commenced in islation in accordance with the Federal German Data Protection February 2011. First of all a comprehensive analysis is being Act. All certifications are renewed annually through the review conducted of the process landscape. The teams will define cur- audit which was successfully passed by all areas in 2010. The rent process requirements and so-called target processes. An Industrial Metrology division was one of the first providers to experienced IT service provider, ISD -Scheer, will assist with the gain accreditation from DAkkS, the legal successor to the Ger- project which is to be completed in 2013. man Calibration Office (DKD) which in future is to be the sole German accreditation agency. In the Defense & Civil Systems Quality management segment, ESW GmbH is certificated in accordance with Nearly all the companies in the Jenoptik segments are I SO 9001 EN 9100, a special quality management system for the aviation certificated. The Jenoptik companies JOIKEN PT Optical Systems and defense industry. This certification was also successfully GmbH, JOIKEN PT Polymer Systems GmbH as well as ESW GmbH acquired in 2010 for the ESW Jena site. 32 are I SO 14001 qualified at the Wedel, Essen and Jena site. All passed their review audits in 2010. JOIKEN PT Polymer Systems In 2010, there were no significant new guidelines on the Euro- GmbH is also certificated in accordance with the medical tech- pean and / or federal German level that require adaptation of nology standards (I SO 13485) as well as the quality manage- the quality and environmental management systems. All Euro- ment standard for automobile construction (ISO / TS 16949) and pean-wide standards, as well as the stringent requirements of therefore meets the stringent requirements in both the health- the federal German government, were met by the companies care and automotive areas. In addition to the re-certification in in the Jenoptik segments in 2010. Germany, companies abroad also successfully passed their certi-

32 cetifitionr ca in the Group (selection)

ISO 9001 C ertification of quality management processes ISO 9100 C ertification of quality management processes specially for the aviation and aerospace industry ISO 13485 C ertification of over-arching management systems for the design and manufacture of medical products ISO 14001 C ertification for the environmental management system ISO / TS 16949 Certification for the automotive industry Six-Sigma-method a statistic based quality management operation

64 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Enronmvi ental management & sustainability which recorded very good results were verified on a German- s r de In 2010, investments in the environment were made primarily wide basis during the course of the year. The Jenoptik buildings l o h e in the Defense & Civil Systems segment. At the Wedel site, achieved good to very good results regarding energy consump- r a

around 75,000 euros were spent on replacing the refrigeration tion. On average they were 75 percent below the standard e sh h t plant and climate-damaging refrigerants replaced with more value of the energy saving regulations for modernized old or f environmentally friendly materials. This process of replacement buildings. The best building achieved just approx. 50 percent of will continue in 2011. The construction of a new production the reference value of 100 percent. Reports containing con-

hall to meet the stringent requirements of the nature conserva- crete proposals for energy efficiency are currently being drawn INFORMATION tion and environmental legislation is being carried out at the up for each building. On the basis of these reports, Jenoptik segment’s Altenstadt site. will produce a cost-benefit analysis for each building in 2011 and define corresponding measures aimed at reducing the

In the area of environmental management, a CO2 lifecycle energy consumption of each building. Total costs of around ment report e assessment was conducted for the first time in 2010 for all the 100,000 euros for the whole project were incurred in the 2010 g German sites. An analysis was carried out of the media con- fiscal year. sumption levels (electricity, district heating, gas, heating oil, Group mana wooden pellets) for all Jenoptik sites. The CO2 emissions in Ger- Sustainability. Many of Jenoptik’s products contribute towards many calculated for the full year 2009 totaled 19,916 tons. As the increased sustainability of business activity, make more effi- expected, this produced an uneven picture for the segments cient use of resources and satisfy the need for greater mobility overall due to the varying media compositions, differing pro- and security. They help to ensure high quality medical care and duction cycles and an energy mix which varied from location to enable new production processes to be implemented (see page location. 33 66).

As described in the 2009 Annual Report, work was begun on the energy evaluation of all Jenoptik’s own real estate in Ger- many. A total of 35 buildings were inspected, assessed and fit- ted with corresponding energy certificates. The preliminary results set out in the 2009 report for two buildings in Jena

33 Engyc er onsumption by the Jenoptik sites in Germany in 2009 2009 1) Electricity 33,174 MWh Gas 10,791 MWh Wood pellets 616 MWh District heating 7,632 MWh Heating oil 1,190 MWh Water 55,000 cbm

1) As a result of the figures for the year 2009 being collated for the first time in 2010 there are as yet no figures available for the previous year.

JO EN PTIK 2010 65 g roup management Report Earnings, financial and asset position

Field of growth: Resource efficiency Jenoptik products With an efficiency level of up to 70 percent, diode lasers are amongst Jenoptik modules, individual lasers and stacks in the JOLD series with the most efficient artificial light sources in the world. varying wavelengths, designs and types of cooling. Various laser applications provide for new, efficient and durable pro- Jenoptik laser processing systems of the J ENOptiK-VOTANTM product duction methods in various sectors. series for the automotive, photovoltaics, electronics, packaging and metal processing industries. Thermographic cameras and modules help to optimize the thermal Jenoptik VarioCAM® high resolution thermographic camera and IR- properties of buildings. TCM infrared thermographic camera module. L Ed s with new concepts for beam guidance and color control are Jenoptik high-speed and high-power chips, point source chips and reducing the energy and maintenance costs for lighting systems on a monolithic display chips. sustainable basis. High precision metrology for improved combustion engines is helping Products in the Hommel-Etamic and Hommel-Movomatic series for to reduce fuel consumption and harmful emissions. tactile, optical and pneumatic measurement. Electrical energy and drive systems for vehicles and trains provide for The Jenoptik product range includes electrical systems such as high optimized energy management given the continuing increasing voltage on-board power systems with outputs of between 20 and demand for energy in vehicles. 500 Kilowatts, as well as on-board power and starter generators.

Field of growth: Infrastructure Jenoptik products Te h worldwide growing need for mobility calls for comprehensive Mobile and stationary systems of the TraffiStar. Multaradar. TraffiPa- concepts and systems for safe road traffic. Metrology from Jenoptik is trol brands. helping to avoid accidents and the resultant economic and environmental consequential costs.

Field of growth: Security Jenoptik products M onitoring sensors and sensor systems provide for secure borders Jenoptik observation platforms of the NUYX S product family, night- and industrial processes. vision equipment and thermal imaging sensors as well as laser medium and long distance rangefinder equipment from the DMLE . E LM and L Rf product family. Mobile generators provide power supplies to military defense systems Power generators and generators. for protecting national infrastructures.

Field of growth: Health Jenoptik products Lasers are facilitating new and gentle medical and aesthetic proce- Jenoptik solid state lasers from the JenLas® D2.X and JenLas® fiber dures, e. g. in the areas of ophthalmology, dermatology and surgery. product family. Fast, efficient and low cost optical analysis processes simplify home Optoelectronic individual and system components in large unit quan- and fast diagnosis, such as e. g. blood sugar level readings. tities (more than 100 million units) for decentralized and mobile, rapid diagnostics. Metrology ensures the quality of medical devices. Tactile, optical and pneumatic metrology from the Hommel-Etamic product series.

Field of growth: Digital world Jenoptik products O ptical systems are used in plants for the manufacture of new chip gen- System solutions individually tailored to client requirements for vari- erations and new semiconductor production processes. ous stages in the semiconductor production process. Digital microscopy cameras are used in industry, medicine and science. Jenoptik CCD and DMOS imaging modules and the ProgRes® microscopy camera Leading camera manufacturers use Jenoptik digital imaging modules. Jenoptik is a Preferred Supplier for the Leica M9.

66 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

There are already basic principles in place for environmentally- Procurement s r de friendly and sustainable products on the product development As in 2009, purchasing activities were the central, group-wide l o h e process level which meet the stringent German and EU-wide project within the Jenoptik Excellence Program in 2010. The r a

requirements. The task of promoting product and process-inte- focus was primarily on the further strengthening of interdivi- e sh h t grated environmental protection is an integral part of the sional strategic purchasing. To this end, on the one hand, the or f group-wide environmental guideline that was expanded in controlling through the addition of group-wide key indicators 2009. was expanded; on the other, the post of Group Central Pur-

chasing Director was filled. INFORMATION Jenoptik also carries out numerous activities to ensure the sustainable design of the working and location environment, The process of Jenoptik’s strategic realignment and the associ- including work-life balance, education and further training, ated consolidation of the Group activities are also continually

junior leadership development, support for children and young reflected in the close cooperation between the divisions’ pur- ment report e people from socially disadvantaged families as well as commit- chasing departments. A key basis for this – the group-wide g ment to other social, scientific and cultural aspects. More standardization of the material groups – was successfully cre- detailed information can be found in the Management Report ated in 2010. Using the international standard eCl@ss, the under Employees & management (page 60) as well as under materials used in the Group were reclassified and now follow a Group mana Assets and liabilities not included in the balance sheet (page 76). standardized numerical system. With the exception of one division which will switch over to the new system during the first According to the SDK - PI Standard 2010-2014, the following half-year 2011, all the German companies now operate with three sustainability key indicators were defined for Jenoptik as a the same standard. It is planned to expand this to foreign com- company in the “Electronic Equipment, Instruments & Compo- panies and this has already been achieved in part. This stan- nents” sector: dardization of the material classification now givesJenoptik a • Proportion of products with “Design for Environment” or Eco tool as the basis for further improving qualitative and quantita- label tive aspects of purchasing. • Energy and greenhouse gas efficiency of the production / products In addition to these over-arching measures, the comprehensive • Audit coverage for I LO work standards within the company operational measures which had already begun in 2009 were and in the supplier chain also continued in 2010. These included the closer interlinking with the activities to the benefit of the inventory management In the Jenoptik Group, these key indicators are not included in as well as the improvement in the process landscape and inter- the company’s controlling nor have they previously been deter- faces of purchasing with other areas in the organization. mined. The Group offset increases in raw material prices through savings resulting from improvements in procurement management, for example through changes in suppliers, outsourcing and design-to-cost measures. Overall, delivery times for some materials were significantly extended in 2010. Jenoptik countered this in close coordination with customers through longer term planning.

JO EN PTIK 2010 67 g roup management Report Earnings, financial and asset position

Costs of materials & purchased services rose by 8.5 percent to The net added value, adjusted in 2010 for the income gener- 224.2 million euros reflecting the growth in sales (prev. year ated through the sale of Jena-Optronik GmbH and in 2009 by 206.6 million euros) and therefore accounted for 40.3 percent reorganization and restructuring costs, rose sharply to 216.2 of the company performance (prev. year 41.9 percent). Raw million euros (prev. year 186.6 million euros) as a result of the materials, consumables and supplies accounted for 163.4 mil- growth in sales. With a higher company performance, the lion euros (prev. year 157.2 million euros). The balance of strong rise, particularly in the net added value, led to an 60.8 million euros corresponds to the level of purchased ser- increase in the added value quota to 40.6 percent (prev. year vices and prepayments which also increased by comparison 37.9 percent). 34 with the previous year (prev. year 49.4 million euros). On the distribution side of the added value, personnel expenses Compared with the previous year, the net added value accounted for 77.4 percent (prev. year 114.4 percent). As a increased by 76.9 million euros to 240.7 million euros. result of the positive Group result, the share of personnel expenses as a proportion of the added value was lower, although total personnel expenses remained at virtually the same level. 35

34 Crtionea of the added value

2010 2009

in million euros in % in million euros in % Company performance (sales, income, investment result) 556.6 100.0 492.8 100.0 . / . Prepayments (materials) 224.2 40.3 206.6 41.9 . / . Prepayments (others) 59.4 10.7 79.4 16.1 . / . Depreciation 32.3 5.8 43.0 8.8 Net added value 240.7 43.2 163.8 33.2

35 Diriuionst b t of the added value

2010 2009

in million euros in % in million euros in % Employees (personnel expenses) 186.2 77.4 187.3 114.4 Public sector (taxes) 6.0 2.5 – 0.4 – 0.3 Creditors (interest) 12.1 5.0 10.8 6.6 Companies, shareholders 36.4 15.1 – 33.9 – 20.7 Net added value 240.7 100.0 163.8 100.0

68 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Non-current financial liabilities (bonds, loans and finance lease) s

2.3 Financial position r de of the Group reduced as a result of redemption payments and l o h e The entire planning, controlling and monitoring of how finan- conversion of repayment installments becoming due in 2011 r a

cial resources are utilized is one of the key tasks of Jenoptik’s to current financial liabilities, to 125.9 million euros since the e sh h t financial management. In addition to a marked eductionr in net start of the year (31.12.2009: 158.2 million euros). These or f debt, focus in the 2010 fiscal year was on the continuing stabi- essentially comprised non-current bank loans in the total sum lization of and improvement in the Jenoptik Group’s liquidity of 123.2 million euros as well as a small portion of finance

situation. In addition to positive cash flows from the active lease in the sum of 2.7 million euros. Non-current bank loans INFORMATION working capital management, the funds raised from the include mortgage loans to the Jenoptik real estate funds in the increase in capital, together with liquidity inflows from the sales sum of von 43.1 million euros. of shareholdings in caverion GmbH and of Jena-Optronik

GmbH, made a significant contribution towards the success With financial liabilities reduced overall, the proportion of ment report e achieved in reducing financial liabilities and halving net debt current financial liabilities increased slightly as a result of the g overall in 2010. repayment installments for non-current loans becoming due in 2011 which were correspondingly reclassified from non-current

Financing analysis to current financial liabilities. As at the year-end 2010 current Group mana Financing structure. In the 2010 fiscal year, the Jenoptik financ- financial liabilities totaled 19.5 million euros, and thus less than ing structure was again primarily oriented toward the medium 14 percent of the total financial liabilities (31.12.2009: 13.5 mil- and long term. Financial liabilities were reduced by more than lion euros). 15 percent in total compared with the previous year to 145.3 million euros (31.12.2009: 171.8 million euros) as a The debt to equity ratio, as the ratio between borrowings result of redemption payments. As at December 31, 2010 non- (346.4 million euros) and shareholders’ equity (282.5 million current financial liabilities, at 125.9 million euros, accounted euros), improved in 2010 to 1.23 (31.12.2009: 1.53). The rea- for 86.6 percent of the total financial liabilities. A free liquidity son for this is a 17.7 percent rise in group shareholders’ equity framework in the form of credit lines and loans yet unused in as the result of a positive net income for the year and the capi- the sum of approx. 84 million euros (excluding cash in hand) tal increase in March 2010 (31.12.2009: 240.0 million euros), secured the Group’s supply of liquidity. with borrowings having fallen by 5.6 percent (31.12.2009: 367.1 million euros).

36 Ne t debt development (in million euros) Nen t a d gross debt (in million euros) 37

30 60 90 120 150 180 210 2010 2009

2010 79.3 Non-current financial liabilities 125.9 158.2 Current financial liabilities 19.5 13.6 2009 159.5 Gross debt 145.4 171.8 2008 191.6 less securities 0.8 1.1 less cash and cash equivalents 65.3 11.2 2007 191.7 Net debt 79.3 159.5

JO EN PTIK 2010 69 g roup management Report Earnings, financial and asset position

Total cash and cash equivalents, including current securities derived from financial liabilities including bonds, loans, bills of with a value of 66.1 million euros (31.12.2009: 12.3 million exchange and finance lease, less cash and cash equivalents and euros), less current financial liabilities in the sum of 19.5 million securities. Positive cash flows from operating activities helped euros (31.12.2009: 13.6 million euros) produced a marked enable investments and capital costs to be fully offset. 36 improvement in the net cash position of the Jenoptik Group compared with the previous year, to 46.6 million euros The gross debt, as the total derived from non-current and (31.12.2009: minus 1.3 million euros). This is mainly attribut- current financial liabilities, also reported a significant fall to able to the positive cash flows in 2010 as well as the increase 145.4 million euros (31.12.2009: 171.8 million euros). 37 in cash and cash equivalents resulting from the cash inflows arising from the capital increase as well as the sales of shares in Analysis of capital expenditure Jena-Optronik GmbH and caverion GmbH. At 15.4 million euros, investments in intangible and tangible assets were up slightly on the figure for the previous year (prev. Following a significant reduction in net debt in the 2009 fiscal year 14.4 million euros). 13.3 million euros and consequently year and a further reduction in the 1st half-year 2010, Jenoptik the largest portion, was invested in tangible assets, particularly Group net debt reported a further significant fall as at the year- in technical equipment and machinery as well as business and end 2010. This was mainly due to the cash inflow in the high office equipment. In this context a process of consistent invest- single figure million euro range following completion of the ment management is continually applied throughout the sale of the minority shareholding in caverion GmbH in the Group. Once again, there was only minimal capitalization of 3rd quarter as well as the active working capital management. development costs. 38 39 However, the largest reduction in net debt was achieved through the cash inflow arising from the sale of Jena-Optronik Investments were offset by scheduled depreciation and amorti- GmbH in the 4th quarter 2010. 36 37 zation in the sum of 25.3 million euros (prev. year: 28.6 million euros). Allowances, at 7.0 million euros, were markedly down As at the end of the 2010 fiscal year,J enoptik Group net debt, on the level for the previous year (prev. year: 14.4 million euros) halved by comparison with the previous year to 79.3 million as 2009 was characterized by negative one-off effects due to euros (31.12.2009: 159.5 million euros). It is defined as the total the economic crisis.

38 Cata pi l expenditure, disinvestments and depreciation (Intangible assets and tangible assets, in million euros) 2010 2009 Change in % Capital expenditure 15.4 14.4 6.9 Intangible assets 2.1 3.8 – 44.7 Tangible assets 13.3 10.6 25.5 Disinvestments 1.7 3.0 – 43.3 Intangible assets – 0.3 0.2 – 250.0 Tangible assets 2.0 2.8 – 28.6 Net capital expenditure (capital expenditure less disinvestments) 13.7 11.4 19.3 Depreciation / amortization / impairment 32.3 43.0 – 24.9 Intangible assets 7.8 15.5 – 49.7 Tangible assets 24.5 27.5 – 10.9

70 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

At 2.1 million euros, investments in intangible assets were Scheduled depreciation on tangible assets and investment s r de nearly 45 percent down on the level for the previous year (prev. properties totaled 20.6 million euros and therefore exceeded l o h e year 3.8 million euros). Of this figure, 0.5 million euros was the the level of capital expenditure on tangible assets. At 3.9 mil- r a

result of capitalized development costs (prev. year: 1.1 million lion euros, allowances, which the Jenoptik Group applies as a e sh h t euros) which, in addition to capitalized patents, trademarks and result of the annual value impairment tests, were down on the or f software, were the reason for the reduction. figure for the previous year (prev. year: 5.0 million euros). Here again the reasons for the high figure in the previous year were

Scheduled amortization on intangible assets was lower than in the restructuring measures and locational reorganization car- INFORMATION the previous year at 4.8 million euros (prev. year: 6.2 million ried out in 2009. euros), with value adjustments to intangible assets, at 3.0 million euros, significantly reduced compared with 2009 (prev. The financial assets of the Jenoptik Group, at 16.8 million

year: 9.3 million euros). The high value adjustments in the pre- euros, reported a slight fall compared with the figure for the ment report e vious year were attributable to the restructuring measures, previous year (31.12.2009: 19.2 million euros). g primarily the withdrawal from the mid format camera business. Analysis of cash flows

In the 2010 fiscal year investments in tangible assets and In the liquidity analysis the cash flows in the year 2010 and those Group mana investment properties totaled 13.3 million euros and therefore of the previous year can be compared in full. The result before accounted for more than two thirds of total capital expendi- working capital changes increased significantly compared with ture. The rise compared with the previous year (prev. year: the previous year to 60.3 million euros (prev. year: 24.2 million 10.6 million euros) is due to increased investment in technical euros) thanks to the positive earnings before tax. In this context, equipment and machinery. At 9.7 million euros, business and the positive effects derived from the sale of Jena-Optronik GmbH office equipment plus technical equipment and machinery have already been excluded. In 2010, the Jenoptik Group suc- accounted for the majority of the capital expenditure on tangi- ceeded once again in meeting all capital expenditure and capital ble assets (prev. year: 8.0 million euros). costs entirely out of current cash flows. 40

39 Cata pi l expenditure by segment (Intangible assets and tangible assets, in million euros) Change 2010 2009 in % Group 15.4 14.4 6.9 Lasers & Optical Systems 6.3 4.2 50.8 Metrology 2.3 2.6 – 11.5 Defense & Civil Systems 5.0 5.4 – 7.4 Other 1.8 2.2 – 18.2

JO EN PTIK 2010 71 g roup management Report Earnings, financial and asset position

C ash flow from operating activities, at 43.7 million euros, was from investing activities in the 1st quarter 2010. The business is down slightly on the figure for the same period in the previous now once again 100 percent back in Jenoptik hands. year (prev. year 53.3 million euros). The reduction is attributable among other things to the payments made in the 1st half-year The free cash flow, the difference resulting from the cash flow 2010 in connection with the personnel measures carried out in from operating activities before taxes in the sum of 45.0 million 2009. There was also an increase in the working capital neces- euros, less the cash flow from operational investing activities sitated by the recovery in the operating business. However, (capex) in the sum of minus 12.1 million euros, is 32.9 million thanks to the active working capital management, this increase euros (prev. year 41.0 million euros). The reduction is mainly was markedly lower in proportion to sales and was due to a attributable to the significant reduction in working capital in significant extent to the sales-related rise in trade accounts 2009 due to the fall in sales (increase in sales in 2010) and the receivable. The Group succeeded in reducing inventories payment of the personnel restructuring costs for which provi- despite the increase in sales. The increase in earnings before tax sion had been made in 2009, which reduced the cash flow in also had a positive effect. The cash flow from operating activi- 2010, particularly in the first half-year. TheJenoptik Group gen- ties enabled the company to invest in intangible assets as well erated a significant portion of the free cash flow of 29.9 million as tangible and financial assets without having to take out euros in the 2nd half-year 2010. additional loans. Cash flow from financing activities was minus 20.4 million Cash flow from investing activities, at 30.3 million euros, euros (prev. year minus 42.0 million euros). The main contribu- exceeded the level in the previous year (prev. year minus 12.5 tory factors here were the proceeds from the 10 percent capital million euros). This figure includes payments for capital expen- increase in March 2010 in the sum of just under 22 million diture on tangible assets in the sum of 13.2 million euros (prev. euros which are included under receipts from allocations to year: 10.3 million euros). Investment in intangible assets totaled equity. Repayments of bonds and loans, at 49.6 million euros, 2.1 million euros (prev. year: 3.8 million euros). However, the were lower than for the same period in the previous year, as in cash flow from investing activities was influenced mainly by the 2009 the convertible bond was refinanced and some of the cash inflow from the sale of the shares in caverion GmbH and debenture loans were repaid (prev. year minus 112.0 million Jena-Optronik GmbH. The payments in connection with the euros). The reduction in the net debt in 2010 primarily affected acquisition of the remaining shares in the laser diode business cash in hand and had therefore no impact on the cash flow from the previous minority shareholder reduced the cash flow from financing activities.

40 Ca sh flow (in million euros)

2010 2009 Cash flow from operating activities before changes in working capital 60.3 24.2 Cash flow from operating activities 43.7 53.3 Cash flow from investing activities 30.3 – 12.5 Cash flow from financing activities – 20.4 – 42.0

72 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Non-current assets were down by 26.2 million euros to s

2.4 Asset position r de 310.7 million euros (31.12.2009: 336.9 million euros). The l o h e All the shares in Jena-Optronik GmbH were sold in the 2010 fis- main reduction was in tangible and intangible assets, invest- r a

cal year and the company was deconsolidated with effect from ment properties and financial assets. This was due on the one e sh h t November 30, 2010. The assets and liabilities of this company hand to the sale of Jena-Optronik GmbH and on the other to or f are therefore no longer included in the balance sheet items as disinvestments, depreciation / amortization and allowances at December 31, 2010. For this reason, the balance sheet items which exceeded the volume of investment. 41

as at December 31, 2010 only provide for limited comparison INFORMATION with those as at December 31, 2009, with the figures for the At 56.2 million euros, goodwill was the largest item under previous year shown below in brackets still including the figures intangible assets (31.12.2009: 59.1 million euros). for Jena-Optronik GmbH.

Tangible assets were lower as a result both of the sale of Jena- ment report e Analysis of the asset structure Optronik GmbH as well as the fact that the volume of invest- g The accounting and valuation policies applied for purchases of ment was below the level of depreciation, particularly in the companies, intangible and tangible assets including investment real estate area. Tangible assets fell by 12.7 million euros to

properties (real estate which is primarily leased to third parties) 139.4 million euros (31.12.2009: 152.1 million euros). There Group mana as well as financial instruments, in particular securities held for were reductions particularly in buildings, including buildings on sale, are explained from page 128 of the Notes to the Annual third party land, other equipment, business and office equip- Report. ment as well as technical equipment and machinery.

The sale of Jena-Optronik GmbH was executed on December 3, Financial assets, including shares in associated companies, 2010. reduced to 16.8 million euros (31.12.2009: 19.2 million euros).

Despite this sale, in the 2010 fiscal year just past the balance Current assets rose by 48.0 million euros to 318.2 million sheet total of the Jenoptik Group increased to 628.9 million euros (31.12.2009: 270.2 million euros). This is mainly attribut- euros (31.12.2009: 607.1 million euros). The 21.8 million euro able to the 54.1 million euro rise in cash and cash equivalents rise is mainly attributable to an increase in cash and cash equiv- to 65.3 million euros (31.12.2009: 11.2 million euros). alents as well as the rise in shareholders’ equity.

41 Comtionposi of the non-current assets (in million euros) Change 2010 2009 in % Intangible assets 72.4 23.2 % 78.0 23.1 %– 7.2 Tangible assets incl. investment properties 161.5 51.7 % 176.6 52.4 %– 8.6 Financial assets 16.8 5.4 % 19.2 5.7 %– 12.5 Other non-current assets 9.1 2.9 % 11.0 3.3 %– 17.3 Deferred tax assets 50.9 16.8 % 52.1 15.5 %– 2.3 Total 310.7 100.0 % 336.9 100.0 %– 7.8

JO EN PTIK 2010 73 g roup management Report Earnings, financial and asset position

C urrent assets also no longer include the inventories, receiv- The shareholders’ equity, including minority holdings, rose by ables and other assets of Jena-Optronik GmbH as at Decem- 42.5 million euros to 282.5 million euros (31.12.2009: 240.0 ber 31, 2010. As a result, this left receivables and other assets million euros). This was helped by the proceeds of the capital at the same level as the previous year, whilst inventories actu- increase as well as the profit reported for 2010. At the begin- ally showed a slight fall despite the increased volume of sales. ning of March 2010, Jenoptik carried out a 10 percent capital However, this was also a reflection of the active receivables and increase which raised approx. 22 million euros for the Group. inventory management which continued in 2010 as one of the This is to be used for growth in the core business plus the con- objectives of the Jenoptik Excellence Program that has been tinuing process of internationalization. Detailed information implemented throughout the Group. Inventories as at Decem- can be found in the Notes, point 25. ber 31, 2010 totaled 148.8 million euros (31.12.2009: 154.7 million euros), receivables and other assets 103.3 million Since the balance sheet total as at December 31, 2010 euros (31.12.2009: 103.2 million euros). increased at a lower rate in proportion to the shareholders’ equity, the shareholders’ equity ratio, as the ratio between The working capital, defined as the total derived from trade shareholders’ equity and balance sheet total, reported a signifi- accounts receivable and inventories, less trade accounts pay- cant improvement from 39.5 percent at the end 2009 to the able, liabilities arising from PoC and on-account payments new figure 44.9 percent. 43 received, remained virtually unchanged at 164.6 million euros (31.12.2009: 166.4 million euros) despite the growth in sales, Non-current liabilities reduced by 40.5 million euros to 165.3 resulting both from the active working capital management as million euros (31.12.2009: 205.8 million euros). This was well as the fact that Jena-Optronik GmbH was no longer mainly attributable to a fall in non-current liabilities to banks, included in the figures as at December 31, 2010. The working down to 123.2 million euros (31.12.2009: 154.4 million euros) capital quota, the ratio between working capital and sales, as the result of the early repayments of bank loans and the improved to a purely mathematical 32.2 percent (prev. year reclassification of installments due in just under 12 months to 35.1 percent) as a result of the increase in sales. Excluding the current financial liabilities. Other non-current liabilities reduced contributions to sales from Jena Optronik GmbH, the working to 11.7 million euros (31.12.2009: 20.1 million euros). This was capital quota was 34.4 percent (prev. year 36.4 percent), with due to the reclassification of one non-current liability to current contributions coming from all three segments. provisions after a silent shareholder in one of the real estate

42 Ca n sh a d Cash equivalents (in million euros) Srhha e olders’ equity Ratio (in percent) 43

2010 2009 10 20 30 40

C ash / credit bank balances 65.3 11.2 2010 44.9 Current securities 0.8 1.1 2009 39.5

2008 42.5

2007 40.3

2006 34.3

74 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

funds had given notice of his decision to sell his shareholding. result of the sale of Jena-Optronik GmbH. The PoC liabilities fell s er

Pension commitments and other non-current provisions to 0 million euros (31.12.2009: 6.6 million euros). Reduced ld o h showed virtually no change. trade accounts payable in the sum of 31.6 million euros e ar h s

(31.12.2009: 38.5 million euros) were offset by increased liabil- e h t

Clauses that take effect in the event of a change of control in ities arising from on-account payments received in the sum of r fo the shareholder structure of JENOPTIK AG as the result of a 27.7 million euros (31.12.2009: 23.8 million euros). takeover bid exist in one agreement that relates to certain

rights of use, as well as for various financing agreements, Liabilities to investment holdings fell from 3.3 million euros at INFORMATION including one debenture loan with a utilized volume of the end of 2009 to 0.6 million euros as at December 31, 2010. 91.4 million euros. Detailed information can be found in the Other non-current liabilities increased to 35.7 million euros Management Report under Basic features of the remuneration (31.12.2009: 30.2. million euros). system from page 40 as well as under Supplementary details in ent report em accordance with the Directive on Takeover Bids Implementation Explanation of purchases and g Act from page 43. sales of companies In the 2010 fiscal year just past, the Jenoptik Group continued,

Current liabilities rose by 19.7 million euros to 181.0 million as planned, with its strategic focus and process of internation- Group mana euros (31.12.2009: 161.3 million euros). Contributions to the alization. increase came from the reclassifications of non-current to current liabilities resp. provisions. This was also reflected in the During the course of the consolidation in the European aero- increase in current financial liabilities to 19.5 million euros space business, Jenoptik sold all its shares in its subsidiary Jena- (31.12.2009: 13.6 million euros). Other current provisions also Optronik GmbH, which had operated the Group’s aerospace increased to 61.9 million euros (31.12.2009: 40.6 million euros) business, to Astrium GmbH. After approval was received from as a result of the reclassification of a non-current liability and the relevant anti-trust authorities at the end of November the growth in business volume. 2010, the sale was executed on December 3, 2010. The deconsolidation of Jena-Optronik GmbH took effect from Novem- By contrast, liabilities from operating activities were reduced to ber 30, 2010, consequently only a small proportion of the con- 59.3 million euros (31.12.2009: 69.0 million euros) mainly as a tributions to sales and earnings were not included in the 2010

44 Financial liabilities by due date (in million euros)

Up to 1 year 1 – 5 years Over 5 years Total

2010 2009 2010 2009 2010 2009 2010 2009 Liabilities to banks 18.5 12.5 83.7 113.9 39.5 40.5 141.7 166.9 Liabilities from finance lease 1.0 1.1 1.7 2.5 1.0 1.3 3.7 4.9 Total 19.5 13.6 85.4 116.4 40.5 41.8 145.4 171.8

JENOPTIK 2010 75 g roup management Report Earnings, financial and asset position

full year. In 2010, the aerospace business contributed 31.9 mil- Assets and liabilities not included in the lion euros to sales and 2.9 million euros to the Jenoptik Group balance sheet EBT I . The cash inflow from the sale made an important contri- The main assets not included in the balance sheet include the bution towards the significant reduction in the net debt of the value of the Jenoptik brand. The firm of semion brand broker Jenoptik Group, down to 79.3 million euros. All 128 employees gmbh calculated a total brand value of 85 million euros in of Jena-Optronik were taken on by Astrium GmbH. November 2010 (prev. year 87 million euros). The Jenoptik brand is therefore one of the 50 leading German brands and With the sale of its 15.1 percent minority holding in caverion occupies the number 39 spot in the rankings (previous year 40). GmbH to the Finnish listed construction and technology group YIT in the 2nd quarter 2010, the Jenoptik Group continued to In the 2010 fiscal year just past, Jenoptik continued to imple- focus on its core business. The transaction was successfully ment its umbrella brand strategy. A uniform umbrella brand has completed in the 3rd quarter 2010 with Jenoptik receiving a net enabled the Group to operate on a more unified basis since cash inflow in the upper single figure million euro range. In January 2009 and to be represented as a single entity in deal- addition, existing receivables and liabilities were cancelled. As ings with customers, business partners and the wider public. expected, the Group was able to generate a non-operating The new, globally uniform logo reflects the Group’s global con- income. With the completion of the sale in the 3rd quarter vergence. On February 1, 2010, RO BOT Visual Systems GmbH 2010, Jenoptik was released from all guarantees issued to or changed its name to JOIKEN PT Robot GmbH and consequently for caverion by way of a corresponding cross guarantee of the also completed the switch to the uniform umbrella brand used YIT Group as well as from other financing obligations. throughout the Group. This was accompanied by a change in the company’s external presence under the Jenoptik brand. The Robot brand will be continued as a so-called ingredient brand.

Information on contingent liabilities not included in the balance sheet can be found in the Notes under point 36.

Intangible assets not included in the balance sheet were not valued as a whole or on an individual basis also in the 2010 fiscal year.

Our success is based on the success of our customers. Tech nology-intensive products and systems can often only be created in collaboration with the client. This calls for mutual trust and knowledge of the customers’ needs, so we see the

76 JO EN PTIK 2010 INFORMATION for the shareholders Earnings, financial and asset position Group management report consolidated financial statements Notes to the consolidated financial statements additional information

long-term collaboration with many of our key clients as the Summary | General statement on the s r de main intangible asset. This is also reflected in the orders total- economic situation l o h e ing around 123.6 million euros that extend beyond the year In 2010, the economic situation of the Jenoptik Group showed r a

2011 (prev. year 120 million euros). a sustained improvement, as can be seen from the statements e sh h t on the earnings, finance and asset position.W ith a moderate or f We also consider our employees’ know-how and experience rise in sales, we recorded a significant increase in the Group gained over many years, as well as their commitment and loy- operating result – in terms of both pure operating profit as well

alty to the company, to be one of the intangible assets. We as inclusive of one-off effects. The increase in operative earn- INFORMATION believe that this is borne out by the low fluctuation ater of ings is a consequence of both the rise in sales and especially of 2.5 percent (prev. year 4.3 percent). improved cost structures. The restructuring measures implemented in 2009 and the continuation of the Jenoptik Excel-

The success of our product and technology developments is lence Program had an impact in 2010. ment report e crucial to our technology intensive business. We see the know- g how that we have accumulated over many years in the field of Positive one-off effects in the Group operating results were pri- research and development, as well as in respect of processes marily attributable to the sale of Jena-Optronik GmbH. Here, and projects, as another important intangible asset. We believe we took advantage of the time window of a consolidating Group mana that other intangible assets include our numerous partnerships, space market. Decisions to sell of this kind are made after formal and informal contacts with suppliers and business part- weighing up the opportunities for all participants. For Jena- ners worldwide, as well as with universities, institutes of Optronik GmbH, the new owner will be better able to ensure applied science and research institutions. We are helped in this growth than we could have. At the same time, we generated respect by our primary location in Jena which enjoys an excel- revenues, which boosted our financial basis and are now avail- lent reputation amongst both scientists and clients as an “Opti- able to finance growth. The loss of sales and earnings contribu- cal Valley”. We are conscious of this and are keen to promote tions is expected to be offset as early as 2011. the scientific, cultural and social aspects of the location. Our sponsorship activities at the Jena site are focused on the devel- Together with the capital increase in March 2010, the sale of opment of and training for young people and on making our minority interests in caverion GmbH and ongoing consistent location more attractive. In 2010, these activities totaled working capital management, the sale was a key factor in halv- approx. 0.1 million euros (prev. year 0.1 million euros). ing our net debt, which now stands at only 79.3 million euros.

JO EN PTIK 2010 77 g roup management Report Earnings, financial and asset position

A key contribution was also made by our consistently positive cash flow, which despite an expansion of business and payment of settlements, for which provisions had been made within the framework of restructuring measures, was again in the mid double-digit million euro range. We are on a solid financial footing.

A sharp rise in order intake in the fiscal year 2010 will play its part in the success of the company in the current fiscal year and beyond. It proves the right orientation of our research & development and that our products and services are in demand internationally. Several major orders we received in 2010, some of which will run for many years, are testament to the trust our customers place in us now and in the future.

78 JO EN PTIK 2010 INFORMATION for the shareholders Segment reporting Group management report consolidated financial statements Notes to the consolidated financial statements additional information

3Sm eg ent Reporting

Our segment reports are prepared in accordance with IFRS 8 s

3.1 lasers & Optical Systems segment r de “Business Segments”. The reporting is carried out on the l o h e basis of the group internal organization and management The segment comprises the Lasers & Material Processing and r a

structure as well as the internal reporting structure. The Execu- Optical Systems divisions. The segment reported increases in all e sh h t tive Board evaluates the financial information which provides its key indicators in 2010. or f a basis for decision-making. The basic principles of valuation and accounting for the segments are the same as those Sales, earnings and order book situation

described for the Group as a whole in the Basic principles of Sales of the segment, at 188.9 million euros, came in 13.3 per- INFORMATION accounting in the Notes on page 121. cent higher than in the previous year (prev. year 166.7 million euros). The 22.2 million euro net increase in sales is primarily The reports are presented with reference to the Lasers & Optical attributable to the strong demand from the semiconductor nd

Systems, Metrology and Defense & Civil Systems segments. industry. This had already begun in the 2 half-year 2009 and ment report e With the exception of the segment operating result, referred to continued in 2010, with the resultant increase in sales for the g below as the segment EBT I , all information can be compared year as a whole from this sector by the Optics and MicroOptics with the figures published in the previous year as Jenoptik has business units of the Optical Systems division. The Lasers &

been showing these after the Group charge since 2010. In this Material Processing division posted a positive performance in Group mana report, the comparison figures for the year 2009 were sales of diode lasers and solid state lasers. In the Laser Process- adjusted. ing Systems business unit, the segment benefited from increasing demand for laser processing systems for the automotive industry. By contrast, sales of laser processing systems for photovoltaics remained below expectations.

Jenoptik generated approx. 70 percent of the segment sales abroad (prev. year 69 percent), similar to the level in the previous year. There was a marked increase in sales by the segment’s US optical sites in the US, A where in 2010 Jenoptik invested heavily in production facilities, among others for the

45 Lae s rs & Optical Systems segment at a glance (in million euros)

2010 2009 Change in % Sale 188.9 166.7 13.3 ETBI 13.3 – 16.5 1) + + Order intake 230.2 168.4 36.7 Order backlog 98.8 59.9 64.9 Employees 1,234 1,284 – 3.9

1) after one-off effects

JO EN PTIK 2010 79 g roup management Report Segment reporting

manufacture of diamond-turned infrared optics which already Information on other key indicators achieved a marked contribution to sales in the 2nd half-year The segment RD + expenses, at 12.6 million euros, were nearly 2010. 20 percent lower than in the previous year (prev. year 15.7 million euros). The reduction is essentially the result of the The segment EBT I reached 13.3 million euros compared with relinquishment of the mid format camera business that had still minus 0.7 million euros in the previous year (minus 16.5 million been included in the figures for the st1 half-year 2009, as euros including one-off effects in the previous year). The increase well as from the reduction in employees, including some in RD + was the result of the growth in sales as well as cost saving and in 2009. The RD + output was 17.5 million euros (prev. year efficiency measures which are carried out in 2009 and 2010 22.0 million euros) mainly in the production of optics and lasers. The increased share of added value as a result of the increasing systems busi- Key development projects in the Optical Systems division are ness in the Optical Systems division also had a positive effect carried out jointly with the customers, primarily from the on results. semiconductor industry. Developments in the Lasers business unit are focused on diode lasers for direct applications, minia- The segment posted a 36.7 percent rise in its order intake to turized designs and the further development of manufacture 230.2 million euros (prev. year 168.4 million euros), resulting for efficient mass production. The 2010Jenoptik Innovation from the continuing high level of demand from the semi Award went to the diode-pumped green JenLas® D2.mini thin- conductor industry as well as for medical and diode lasers. The disk laser. Its compact design provides for new applications figure includes a major order for medical lasers from a US cus- mainly in the medical and entertainment area. With an tomer which will extend over three years and, at nearly 12 mil- improved beam quality, the size of the housing was reduced by lion euros, was one of the largest orders for laser systems in the more than a factor of 3. The advantages it offers are efficient company’s history. There was increased demand for laser pro- mass production and easy integration into various types of cessing systems from the automotive industry. The demand equipment. The new compact laser went into mass production from the photovoltaics industry, in particular for the manufac- in Jena in June 2010. ture of thin-film solar cells, remained below expectations. This was offset by Jenoptik with the launch of new modular laser Employees & management. As at December 31, 2010, the processing systems for crystalline photovoltaics. Demand rose Lasers & Optical Systems segment employed a total of 1,234 as at the end of the year, particularly for modular systems. persons and therefore 50 or 3.9 percent fewer than at the end of 2009 (31.12.2009: 1,284 employees). The segment The segment recorded a book-to-bill ratio of 1.22 (prev. year employed a total of 128 persons abroad (prev. year 113). In 1.01). The order backlog increased accordingly in net terms by order to meet the demands of our ongoing internationaliza- 38.9 million euros to 98.8 million euros (31.12.2009: 59.9 mil- tion, employees were hired abroad, among others in manage- lion euros) and accounted for 47 percent of the sales in the ment and sales. In the Optics and Optoelectronics business current fiscal year. units, the Optical Systems division focused its training activities on basic training in project management. A total of 110 employees took part in the three-day training sessions. In addition, 29 employees qualified as certified project management specialists (G PM – Deutsche Gesellschaft für Projektmanage- ment e.V.) in the Optical Systems and Lasers & Material Process-

80 JO EN PTIK 2010 INFORMATION for the shareholders Segment reporting Group management report consolidated financial statements Notes to the consolidated financial statements additional information

2 ing divisions. The Jenoptik Junior Leadership Program (J LP) was in new machinery and systems in connection with the restruc- s r de successfully completed by ten participants, and six further par- turing of optics production at Jena. l o h e ticipants started the program. r a

Marketing. In addition to the new Internet portal that went e sh h t Production & organization. Within the framework of the ‘live’ for the whole of the Jenoptik Group in March 2010, or f Jenoptik Excellence Program, internal processes were optimized the Optoelectronic Systems business unit opened an online in virtually all of the segment’s manufacturing areas. Diode shop in October 2010. It will be used for marketing standard LEDs, chips and photo diodes. In addition, a lasers have been manufactured at the Jena site in accordance products such as INFORMATION with the principles of lean production since the end of 2009. In customer relationship management system was introduced in the the Micro Optics business unit, training on the Six Sigma Optical Systems division in 2010. In 2010, the segment show- method began in 2010. In the Optics business unit, the entire cased itself at numerous trade fairs at home and abroad. 46

production was restructured in 2010 without interrupting work ment report e and now follows the manufacturing process for optics, with Products & technologies g optimized procedures and utilization of space. Parts of the The segment presents new products, technologies and produc- optics production at the Giessen site that was closed in tion processes each year in January at the sector’s key trade

2009 / 2010 were also integrated. fair, “Photonics West”, in San Francisco. The Lasers & Material Group mana Processing division showcased the full value-added chain for The corporate structure of the segment was also streamlined O EM laser beam sources – from semiconductor material, single and adapted to the group structure in the 1st half-year 2010. lasers, diode laser stacks, fiber-coupled modules to thin-disk In order to make even better use of the synergies in the US A in and fiber lasers. In addition to laser bars with new wavelengths future, all US optics companies were amalgamated within that are particularly suitable for applications e. g. in the print JOIKEN PT Optical Systems Inc. with effect from January 1, 2010. industry, the division launched a new diode laser module with With a total of 128 employees as at December 31, 2010, the integrated qcw stack that was developed for industrial, military company is headquartered in the US A at Jupiter (Florida). Other and medical applications. In addition to direct applications, locations are Easthampton (Massachusetts), Huntsville (Ala- Jenoptik concentrates on the further development of and bama) and Rochester Hills (Michigan). On April 1, 2010, the improvement in the pumping properties of its laser bars and Berlin-based EPGA I P Optoelektronik GmbH was merged with diode lasers, in particular for fiber laser pumping. It also pre- JOIKEN PT Polymer Systems GmbH. Triptis, with retrospective effect from January 1, 2010. In May 2010, the limited company structures were adapted in Germany. The Laser Technology business area of the former JOIKEN PT Laser, Optik, Systeme S elected trade fairs in 2010 46 GmbH and JOIKEN PT Laserdiode GmbH merged to form JOIKEN PT Laser GmbH. The former JOIKEN PT Laser, Optik, Sys- January Photonics West, San Francisco, UAS teme GmbH therefore operates exclusively in the area of optics March Technologies Hi-Tech, Tel Aviv, Israel and optoelectronics and since then has traded under the name March Laser World of Photonics China, Shanghai, China of JOIKEN PT Optical Systems GmbH. April Light + Building, Frankfurt / Main, Germany June Optatec, Frankfurt / Main, Germany Capital expenditure of the Lasers & Optical Systems segment July Semicon West, San Francisco, UAS totaled 6.2 million euros (prev. year 4.2 million euros). The September PVSEC Valencia, Spain increase is due on the one hand to the expansion of the pro- October Euroblech, Hannover, Germany duction sites in the US A and on the other to capital expenditure November ComPaM ed, Düsseldorf, Germany

JO EN PTIK 2010 81 g roup management Report Segment reporting

sented the new optical isolator product line for high power cameras by adding the so-called SpeedXTcore technology with lasers as well as the new and more powerful infrared thin-disk rapid live image and a correspondingly enhanced operating laser for photovoltaics and micro materials processing. In process for the user. Thanks to the live image speed, which has mid 2010, Jenoptik presented new laser processing systems for been increased by 2 to 3 times and combined with high resolu- the manufacture of crystalline solar cells at the photovoltaics tion, the preparation can be sharpened and positioned with trade fair PVSEC in Valencia, Spain. The modular laser process- even greater ease and the focusing time reduced. ing systems which allow the integration of various handling processes attracted a great deal of interest. In addition, in 2010 Internationalization the range was expanded by the addition of laser processing In 2010, the segment expanded its international presence pri- systems for 3D metal processing. New machine concepts for marily for the laser business in Asia and optics production in metal processing provide in particular for cutting and welding the US. A The new Laser Application Center in South Korea to meet complex and individual requirements. opened in March 2010. This will enable customers and potential customers to locally test lasers and laser applications and The Optical Systems division is a full service provider and devel- further develop their processes in conjunction with Jenoptik opment partner for complex system solutions. Within the engineers. A significant amount has been invested in this Cen- division the integration of competencies ranging from classical ter, approx. 3.4 million euros – mainly in 2009. In conjunction optics, polymer optics, micro-optics, optoelectronic systems, with the longstanding partner Kantum Electronics Co. Ltd, digital image processing to hardware and software allow for Jenoptik expanded its presence in Japan in November 2010. innovative customer-tailored solutions. The new products Since then, the previous joint venture between Jenoptik and showcased at Photonics West included LED displays for mobile Kantum, JOIKEN PT Laserdiode Japan Co., which primarily spe- devices with a marked reduction in energy consumption and a cialized in the sale of diode lasers, has been trading as hundredfold higher luminosity. The division also presented opti- JOIKEN PT Japan Co. Ltd. Both the Laser Application Center in cal precision components, O EM imaging modules and light Korea as well as the Japanese Jenoptik company are available modulators. New processes for diffractive and refractive struc- to assist all of the Group segments. The Optics business in par- tures for calcium fluoride (CF a 2) from the Micro Optics business ticular, which up to now has only had a minimal presence in unit are aimed specially at the semiconductor industry which is Asia, aims to markedly expand its local activities from 2011. particularly important regarding optical systems and components in the division. The developments in the Optoelectronic The sale of lasers in the US A has been intensified in addition to Systems business unit are reflecting the market trend towards the capital expenditure and streamlining of the optics organiza- small, compact modules and systems. In this context, the tion. The collaboration with the longstanding partner RPMC advantages lie not just in miniaturization but also in weight Lasers Inc. was expanded in November 2010. In addition to the reduction. To meet the increasing demand, Jenoptik presented sale of high power diode lasers and semiconductor materials, innovative free-form surfaces and micro lens arrays in 2010. RPMC is now also an exclusive partner for solid state lasers and The use of plastic also allows for low cost manufacture, making at the same time was appointed “Exclusive Distributor in North the use of these components attractive for various markets, America” for all Jenoptik laser beam sources. This means that among others automotive & mobility, lighting, health care and Jenoptik now offers the North American market the entire life sciences as well as sensor systems. The Digital Imaging busi- technology chain – from standard products through to special ness unit was expanding its ProgRes® CCD range of microscopy versions designed to customer specifications.

82 JO EN PTIK 2010 INFORMATION for the shareholders Segment reporting Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Actionquisi s, cooperation Arrangements & s

3.2 Metrology Segment r de other key events l o h e There were no acquisitions in the Lasers & Optical Systems seg- The Metrology segment comprises the Industrial Metrology r a

ment in 2010. Jenoptik is a partner in various cooperation and TrafficS olutions divisions. After the sharp fall in sales and e sh h t arrangements, development projects and initiatives. A new results in 2009, the segment succeeded in recovering faster or f addition in 2010 was the Berlin-based initiative “WideBaSe”, than had been anticipated in 2010. which is aimed at the development, manufacture and sale of

materials based on wide bandgap semiconductors. Jenoptik is Sales, earnigns and order book situation INFORMATION one of ten companies participating in this initiative. The Sales of the segment totaled 113.8 million euros (prev. year Thuringia-based joint project CoLight that develops and tests 96.0 million euros). The 18.5 percent increase or 17.8 million LED-based intelligent and energy-efficient lighting systems was euros in net terms came from both divisions. The Industrial

also presented in March 2010. The Jenoptik Optoelectronic Sys- Metrology division benefited from a faster and strong recovery ment report e tems business unit is involved in this project. in the automotive industry which has been investing more g heavily in production equipment since the beginning of 2010. In January 2010, the Digital Imaging business unit of the Opti- This was already reflected in the sales of the division in the

cal Systems division was appointed preferred supplier to Leica 2nd half-year 2010. In the 1st quarter 2010, the Traffic Solutions Group mana Camera AG. The longstanding partners also agreed to expand division was awarded a major order for more than 12 million their collaboration to other projects. Jenoptik was awarded the euros. This was settled in full in the 3rd quarter 2010 and is one preferred supplier status as a result of the excellent production of the reasons for the rise in the foreign share of sales to and rapid ramp-up of production capacities for components for approx. 66 percent (prev. year 61 percent). the LE ICA M9 rangefinder camera. As a result of the camera’s market success, Jenoptik supplied four times the volume of the For Jenoptik, the segment EBT I benefitted from the comprehen- originally planned number of units in 2010. sive measures aimed at reducing costs in the previous year and came in at 8.6 million euros compared with a minus of 6.2 million euros in 2009 (minus 14.6 million euros including one-off effects in the previous year). Contrary to original expectations, the EBT I of the Industrial Metrology division recorded

47 Merogy t lo segment at a glance (in million euros)

2010 2009 Change in % Sales 113.8 96.0 18.5 ETBI 8.6 – 14.6 1) + + Order intake 137.0 83.2 64.7 Order backlog 45.1 21.9 105.9 Employees 632 769 – 17.8

1) after one-off effects

JO EN PTIK 2010 83 g roup management Report Segment reporting

a very good development, posting a marked positive result the range of small mobile devices as well as the standardization and consequently exceeded the target of achieving the break- of the system software. In the TrafficS olutions division, the even on a month by month basis at the end of the year. As focus of the developments is on three-dimensional recording with the sales, the major order in the Traffic Solutions division with laser and radar technologies. was also reflected in a marked increase in theEBT I in the 2nd half-year. The EBT I of Traffic Solutions also benefited from loca- Employees & management. In 2010, there was a reduction in tion improvements in the previous year, particularly abroad. the number of employees in the Metrology segment – from 769 at the end of 2009 to 632 as at December 31, 2010. This The segment posted a 64.7 percent increase in its order intake, is primarily attributable to the Industrial Metrology division. or 53.8 million euros in net terms, to 137.0 million euros 178, or approx. 28 percent, of the employees in the segment (prev. year 83.2 million euros). This was due to the rapid recov- worked abroad (prev. year 288 or approx. 37 percent). 100 ery in demand from the automotive industry since spring 2010, employees in the Industrial Metrology division were still on as well as the abovementioned major order for the Traffic short-time working at the beginning of 2010, but this figure S olutions division. The TrafficS olutions division was also had fallen to zero by the end of the year. Nine participants awarded an order for a new concept in speed monitoring at successfully completed the Jenoptik Junior Leadership Program the beginning of 2010. TraffiSection® monitors the average (J2LP). speeds of road traffic users over a specific section. The system, which offers the option of combining mobile and stationary Production & organization. Comprehensive restructuring of the units, was sold to Switzerland, to Austria and an Arabian coun- locations in the Industrial Metrology division were primarily car- try and has consequently successfully positioned itself in the ried out back in 2009. Structures existing in parallel were amal- market within a short space of time. The total order volume gamated in Germany. In the 2010 fiscal year, the differing was approx. 4.0 million euros. requirements of the two business models in the area of distribution were taken into account with the organizational separa- The book-to-bill ratio increased to 1.20 compared with 0.87 tion of project and standard business. The optimization of the in the previous year. The segment posted a correspondingly production processes in the TrafficS olutions division was con- positive order backlog. This more than doubled to 45.1 million euros (31.12.2009: 21.9 million euros) although the major order for Traffic Solutions had already been settled and was therefore no longer included in the order backlog.

Information on other key indicators S elected trade fairs in 2010 48 The segment RD + expenses totaled 8.6 million euros and therefore showed a slight increase over the previous year (prev. March: Control France, Paris, France year 8.3 million euros). The RD + output, which includes devel March: Intertraffic, Amsterdam, the Netherlands opments on behalf of customers, totaled 12.4 million euros May: Control, Stuttgart, Germany (prev. year 11.9 million euros). The central development themes August: Control, Shanghai, China in the Industrial Metrology division continue to be systems that September: IMTS, Chicago, UAS combine various measurement technologies, the expansion of November: Roadex Railex, Abu Dhabi

84 JO EN PTIK 2010 INFORMATION for the shareholders Segment reporting Group management report consolidated financial statements Notes to the consolidated financial statements additional information

tinued. As a result of the major orders with relatively short designed for small crankshafts or larger gear shafts. Jenoptik s r de delivery times, increased demands were placed on the produc- has been manufacturing optical shaft measurement systems for l o h e tion throughput. The division takes account of this through the around ten years with its opticline C ONTOUR product family. r a th increasing standardization of the product range. The 1,000 system left the Jena production site in summer e sh h t 2010. With a diameter of just 0.612 mm, the newly launched or f In 2010 the segment's capital expenditure totaled 2.3 million air spindle is specially designed for the pneumatic, contactless euros (prev. year 2.6 million euros). The Traffic Solutions division measurement of very small bores, for example those used on

invested in, among other things, new vehicles for traffic moni- injection parts. Jenoptik has also launched a new generation of INFORMATION toring. Together with the systems for Traffic Service Providing analysis software for roughness and contour measurement. which are installed into them, these are loaned to local authorities over a predefined period and therefore remain the property The product highlight of the Traffic Solutions division was the

of the division. 3D Tracking Radar launched in 2010. This innovative sensor ment report e system for recording speeding vehicles and red light infringe- g Marketing. The Traffic Solutions division completed the change- ments monitors a number of vehicles simultaneously. Using a over to the Jenoptik umbrella brand which has been standard- precise lane assignment it offers optimum analysis rates and ized throughout the Group with effect from February 1, 2010. indisputable evidence. Thanks to the further development it is Group mana The Industrial Metrology division also invested in its interna- now possible to simultaneously record and track up to 32 tional web presence. In addition to the new website within the objectives on various lanes. It also operates on a “non-invasive” framework of the standardized Internet presence on a group- basis, which means that no sensors have to be installed in the wide basis, the division showcased itself with regional Internet road. This significantly minimizes the installation costs as well sites in China and for the French-speaking region. The segment as the follow-up costs. The presentation of the product in Swit- also presented its range of services at numerous domestic and zerland in autumn 2010 generated significant international foreign trade fairs. 48 interest not only among specialists but also by the general media. In 2010, the TrafficS olutions division also launched a Products & technology new camera technology. The so-called SmartCamera® IV is the The segment presented new products and technologies at integration of two special cameras in a compact housing. the two leading headline trade fairs, Control for the Industrial C ombining them provides e. g. for video monitoring with con- Metrology division and Intertraffic for the Traffic Solutions tinuous number plate recognition as well as photographic division. recording of the infringement within one compact unit.

In 2010, the Industrial Metrology division launched a number Internationalization of new products. The internal test sensor was developed for In the fiscal year just past, the Metrology segment extensively the optical surface inspection of cylindrical bores and is suitable broadened its international presence. The new site in China for use in fully-automated, 100 percent parts inspection. The was officially opened in May 2010. Project planning, produc- 360° panoramic lens does not require the workpiece or the tion, sales as well as an application and training center for the sensor system to be rotated and thanks to its very short image Industrial Metrology division are all now located under one roof capture time of 5 to 7 seconds a complete cylindrical bore can in an area covering approx. 1,500 square meters. The new be fully inspected for damage. One new addition in the area of building in the Shanghai Pudong Industrial Zone significantly optical shaft measurement systems is a solution specially expanded the production capacities and the Service Center.

JO EN PTIK 2010 85 g roup management Report Segment reporting

Customers can test and receive training on the measurement 3.3 defense & Civil Systems Segment equipment in a training and demonstration room. The amalgamation of the division’s existing activities with AS E Auto Equip- In the Defense & Civil Systems segment, the sale of Jena- ment Co. Ltd. acquired in 2009 has therefore now been com- Optronik GmbH took place on December 3, 2010. The completed. Other Group divisions can also access the know-how in pany was deconsolidated with effect from November 30, 2010. procurement as well as the assembly capacities. The figures for the segment include Jena-Optronik up to the date of deconsolidation – unless stipulated otherwise. The division benefited from its presence in key markets for the automotive industry, i.e. in addition to China also in India, by Sales, earnings and order book situation winning orders for totally equipping motor plants at various The Defense & Civil Systems segment posted sales of 205.8 mil- locations with production metrology. For example, in autumn lion euros, virtually the same level as in the previous year (prev. 2010 the division successfully completed the delivery of state- year 205.3 million euros). The figure includes sales of 31.9 mil- of-the-art metrology for a total of three General Motors plants lion euros of Jena-Optronik GmbH, which was subsequently in Thailand, India and Uzbekistan, including a corresponding sold. Consequently, the sales for 2010 after adjustment for the after-sales concept. sale totaled 173.9 million euros. Foreign sales were 47.6 million euros. Acquisitions, cooperation arrangements & other key events The segment EBT I , at 11.5 million euros, was down slightly on There were no acquisitions in the Metrology segment in 2010. the previous year (prev. year 12.2 million euros) as the result of There are cooperation arrangements in place with numerous a change in the sales mix. The aerospace business, which has partners and institutions. In TrafficS olutions, a sponsorship since been sold, made a contribution to earnings of 2.9 million project in Weimar, supported by Jenoptik, took 1st prize within euros so after adjustment for the sale, the segment EBT I was the framework of the campaign entitled “Roads to Respect” 8.6 million euros. The one-off effects arising from the sale are staged by the European Road Traffic Safety Council. included in the Group EBT I and were not shown on the divisional level.

49 De efens & Civil Systems at a glance (in million euros)

2010 2009 Change in % Sales 205.8 205.3 0.2 ETBI 11.5 12.2 – 5.7 Order intake 211.6 178.0 18.9 Order backlog1) 212.6 260.2 – 18.3 Employees1) 931 1,077 – 13.6

1) Jena-Optronik GmbH is no longer included in the order backlog or number of employees as at December 31, 2010.

86 JO EN PTIK 2010 INFORMATION for the shareholders Segment reporting Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Thanks to a number of large, long-term orders, the segment Employees & management. The number of employees in the s r de reported a record order intake in the total sum of 211.6 million Defense & Civil Systems segment reduced by 146 to 931 l o h e euros compared with 178.0 million euros for the same period (31.12.2009: 1,077 employees). Ten of these employees r a

in the previous year, an increase of 18.9 percent. The figure worked abroad. The number of employees has primarily fallen e sh h t includes the major order valued at approx. 20 million euros for as a result of the sale of the space business. With the sale of or f radomes for the Eurofighter to which Jenoptik is the consor- Jena-Optronik GmbH, 128 employees left the Group. The tium leader. Jenoptik is also supplier of the power generators Jenoptik Junior Leadership Program (J2LP) was successfully com-

for the Patriot missile defense system. In this area, the segment pleted by two participants, and two further participants started INFORMATION won an order worth around 23 million US dollars from the USA the program. in August 2010. In addition, the segment will be supplying airport ground generators as well as frequency transformers to a Production & organization. In 2010 the segment’s product

scheduled airline based in the Middle East for the airport infra- development processes ( Pdp) were analyzed and optimized as ment report e structure, with a total order value of 5 million euros. The partial part of the Jenoptik Excellence Program. The objective is to g order for the PUA M armored fighting vehicle received at the standardize, significantly shorten and increase the efficiency of beginning of the current 2011 fiscal year and valued at nearly 40 the process. Employees involved in the product development million euros is not included in the order intake for the fiscal year process received comprehensive training. It will be imple- Group mana just past. Jenoptik anticipates another partial order valued at mented during the course of the current fiscal year at all the nearly 30 million euros during the course of 2011. Jenoptik’s segment’s locations in accordance with the formulated require- total share in the new armored fighting vehicle project for the ments and processes. German Army will be approx. 70 million euros. Production at the Altenstadt site has been optimized since Information on other key indicators 2009. In connection with the new process organization of the The RD + expenses remained unchanged at 9.0 million euros production and a substantially increased demand for lager (prev. year 9.0 million euros). Key development projects extend power units, work on the construction of the new production over the long term and are carried out mainly in conjunction hall began at the end of 2010 and is expected to be completed with cooperation partners. In the defense area details cannot at the end of 2011. The new construction will be the seg- be given for security policy reasons and as a result of the very long term planning. This applies both to the energy and stabilization systems areas as well as to optical information systems and sensors. As a result of the high proportion of customer financed development services in this segment, theRD + S elected trade fairs in 2010 50 output, at 21.5 million euros, was correspondingly high in relation to the RD + expenses (prev. year 18.0 million euros). The June: Eurosatory, Paris, France segment will continue with the intense pursuit of the develop- June: Interschutz, Leipzig, Germany ment project ‘transparent protection’. The transparent compos- September: Innotrans, Berlin, Germany ite armor for use in armored vehicles that still guarantees visibil- October: AUS , Washington D.C., UAS ity following ballistic threats is to be launched on the market step by step in 2011.

JO EN PTIK 2010 87 g roup management Report Segment reporting

ment’s most important investment project in 2011, with operates on a spectral-selective basis. This means that, using smaller parts of this already included in the segment’s capital special filters, the camera can take readings of certain materials expenditure in the 2010 fiscal year. Total investment in 2010 (e. g. glass, flames or plastic) or “look through” them without was 5.0 million euros (prev. year 5.4 million euros). having to make allowance for them in the readings. This, for example, allows to take readings in kilns through a glass Marketing. In 2010, the segment participated in a number of window. primarily international trade fairs. The segment showcased on a joint stand at Eurosatory, the key headline trade fair for defense The laser rangefinder equipment product line was also expanded. and security which is held every two years in Paris. The Internet The new measurement equipment is able to deliver reliable site, which combines the segment’s entire range on one site results even on poorly reflective surfaces over large distances within the framework of the Group portal, was also completely and is therefore suitable for a markedly greater number of updated. 50 applications. In the past, measurements on poorly reflective surfaces could only be taken over short distances. Products & technologies The focus of the presentation at Eurosatory was on compact Internationalization solutions for power supplies in military land vehicles, including, The product portfolio of the Defense & Civil Systems segment among other things, a 120 KW starter generator which is is in international demand as a result of its technological capa- simultaneously able to supply external high consumption units. bility. Over recent years, it has successfully gained a foothold on Also on show was the model for a machine set for the 17 KW international platforms through a number of its components APU for use in various, mainly armored vehicles. In addition to and subsystems. The international sale of the Optical Informa- the electronic system components, the segment also included tion & Sensors area is being intensified, making increasing use optronic observation equipment, such as the NYXS U . of the existing infrastructure of the other segments. The focus of the segment’s internationalization is on the US American At the Interschutz trade fair in June in Leipzig, the segment pre- market. sented together with Dräger the first thermal imaging cameras from its Optical Information & Sensors area. The camera was Acquisitions, cooperation arrange- jointly developed by the two companies as part of a coopera- ments & other key events tion agreement. The new infrared camera module went into The segment made no acquisitions in 2010. The sale of Jena- mass production in Jena. It is an integral part of the new ther- Optronik GmbH has been explained on a number of occasions mal imaging cameras from Dräger, with the target market within the framework of the Management Report (see page being fire figthers as well as search and rescue organizations. 76, Purchases and sales of companies). Within the framework of the reporting during the course of 2011, the key indicators In March 2010, Jenoptik launched a new thermographic cam- of the whole Group as well as of the Defense & Civil Systems era, the VarioTEMH R ® InSb, which has been specially designed segment will be adjusted for the sale of Jena-Optronik GmbH for industry and research institutes. The camera covers a tem- and shown on a comparable basis. perature range from minus 40 to plus 2,000 degrees and also

88 JO EN PTIK 2010 INFORMATION for the shareholders Report on post-balance sheet events Group management report consolidated financial statements Notes to the consolidated financial statements additional information

4 rt Repo on Post- 5 RISK REPORT Balance Sheet Events

There were no events of significant importance occurring after s

5.1 Risk Policy r de the balance sheet date of December 31, 2010. l o h e Commercial business activities require a sustained and respon r a

sible approach to weighing up opportunities and risks. As a e sh h t Group with global operations in various areas of business, or f Jenoptik sees the exploitation of business opportunities and the simultaneous control of the associated risks as one of the basic

principles of responsible corporate management. This is the INFORMATION only way to secure the continued survival of the company and to systematically and sustainably create added value for the Group. In this context, the Jenoptik corporate strategy forms

the basis for the Group’s risk policy. ment report e g

Opportunity and Risk Management System At Jenoptik, opportunity and risk management are closely

interlinked and are essentially derived from the strategies and Group mana targets of the individual business units.

In this context, opportunities are identified and analyzed within the opportunities and risk management system. Responsibility for the management of opportunities lies with the operational units in collaboration with Strategy & Business Development central department and is an integral component of the group- wide planning and control systems. Specific potential relating to the individual divisions and business units is the subject of regular discussion through highly detailed market and competitor analyses, while not forgetting the associated risks when making decisions. Opportunities are explained in more detail in the Forecast Report from page 103.

The objective of the risk management is to take a more conscious and consequently more controlled approach to opportunities and risks within the company. By setting group-wide guidelines, the Executive Board ensures that effective and systematic risk management is in place. Jenoptik understands risk management as being the totality of all risk-related activities and measures which help to ensure that the corporate objectives are achieved. The process for determining areas of risk,

JO EN PTIK 2010 89 g roup management Report Risk report

identifying risks and the subsequent analysis, assessment and known risk changes to the same extent, then the Group risk limiting of the risks through planning, control and monitoring officer and theE xecutive Board must be informed immediately systems is continually reviewed and updated. All domestic and and an ad-hoc risk report produced. foreign companies in which JOIKEN PT AG has an investment holding of more than 50 percent are subject to a group-wide In addition to the monthly meetings of the Executive Board, risk management system comprising the following elements: strategy and results meetings as well as conference calls act • a risk manual specific to the company’s equirementsr as group-wide committees for the purpose of identifying, • Risk Officers within the Group as well as in the individual analyzing and dealing with opportunities and risks. In these business units (risk units) Executive Board and management jointly discuss relevant • standardized risk profiles specific to the individual business units opportunities and risks as well as their consequences for the • a general, group-wide reporting structure company in conjunction with the heads of the Finance as well • a regular, uniform system of risk reporting on the Group and as Strategy & Business Development departments. The Executive subordinate levels. Management Board, as an expanded management committee of the Group, met five times in 2010. The Jenoptik Executive Dealing with risks Board consults and, in conjunction with the heads of the five Since the Jenoptik Group has various operational areas of divisions and the Head of Human Resources, Supply Chain business, a general risk pattern provides a tool for highlighting Management & Shared Service Center takes decisions on key, potential risks in an organized way. Taking the risk pattern into general, strategic and operational group matters. A group- account, the areas of risk must be determined as part of a wide, uniformly structured innovation and investment control- risk inventory to be conducted each year (risk screening), ling system also guarantees that by conducting a critical evalua- depicting the material risks for the company. Checklists, intro- tion of new development projects, including carrying out a risk duced in 2010, are used as an aid for the annual risk inventory, assessment, only the best ideas are pursued through to com- with these checklists being subsequently reviewed by the risk mercial success on a systematic basis. officers.W ithin the framework of a risk analysis, the risk officers of the risk units regularly assess all the risks identified on Monitoring and further development the forecast dates in terms of their probability of occurrence of the risk management system and impact on the results. The results of the risk identification In addition to the obligation of the Executive Board to take and analysis – where these exceed certain thresholds – are appropriate measures in order to promptly identify any devel- included in the risk report which is sent several times a year to opments that jeopardize the company’s existence, another the Group’s risk officer. Taking into account the potential requirement is the establishment of the monitoring system and aggregation of risks, the risk report summarizes the individual a regular review of its efficiency and effectiveness. This task is reports into a Group risk report for the attention of the Execu- assumed by the Risk Committee in accordance with the Risk tive Board. Measures which are highlighted must be imple- Manual. mented by specifically named individuals responsible, with a deadline being set. If the first time a risk with a specific mini- The Group Risk Committee comprises the Executive Board, the mum impact on the results and minimum probability of occur- Group Risk Officer and theH eads of Legal Affairs, Internal rence arises is between the reporting dates, or if an existing Audit as well as the Commercial Management and meets at

90 JO EN PTIK 2010 INFORMATION for the shareholders Risk report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

least once a year. The risk early warning system is also assessed implemented controls and process-independent monitoring s r de by the auditors as part of the audit in order to ensure that the measures. Guidelines govern uniform accounting and valuation l o h e system is appropriate for the prompt recording, evaluating and principles for the accounting and reporting in accordance with r a

communicating of all risks which have the potential to jeopar- IFRS and ensure the process of preparing the consolidated e sh h t dize the company’s existence. financial statements. In this context, new egulationsr and or f changes to existing rules are analyzed promtly and, if necessary, Jenoptik has a control system that comprises both internal as implemented within the guidelines and accounting processes.

well as external processes. Through targeted controls on INFORMATION various process levels, the system identifies potential gaps in The Finance department has technical responsibility for prepar- the monitoring and initiates the corresponding countermeasures. ing the consolidated financial statements. Clear responsibilities A regular review of the method ensures and improves the with separation of functions preserving the double-check

effectiveness of the way in which risks are identified and ana- principle are the characteristic features of the financial report- ment report e lyzed. The tasks of Jenoptik’s control system are carried out by ing process in the Jenoptik Group. Additional monitoring tasks g the Internal Control System (ISC ) and the Internal Audit. are performed by specific group functions, such as e. g. the Central Tax department. Binding requirements in terms of con-

The Internal Control System is an essential element of the tent and timing reduce the risk of inconsistent accounting prac- Group mana Jenoptik risk management system and covers the totality of tices within the individual Group companies. All employees all measures, basic principles and processes in order to achieve involved in the accounting process receive regular training. the corporate and control targets. In addition to the compli- The financial systems are protected from misuse through access ance with laws and guidelines, this includes in particular the restrictions. Centralized control and regular backup of the IT security and efficiency of the business processes as well as the systems reduce the risk of data loss. reliability of the financial reporting. By consistently applying basic principles of and instructions on risk policy in the form of The IFRS reporting packages used by the companies are trans- group and divisional guidelines, a large proportion of risks can ferred to a consolidation system for the purpose of producing be prevented or their impact at least reduced. the Jenoptik consolidated financial statements. echnicalT system controls verify the transmitted financial statement data and Essential features of the internal control and individual annual financial statements of the companies risk management system with regard to the Group included in the consolidation. A formalized interrogation of accounting process (Sect. 315 Para. 2 No. 5 HGB information relevant for consolidation purposes also ensures (Ge rman Commercial Code)) that Group internal transactions are eliminated. All the consoli- The internal control system relating to the accounting is dation processes required for producing the consolidated finan- embedded within the company-wide risk management system cial statements are documented. In 2011, the group-wide stan- as part of the Jenoptik Group’s overall Internal Control System dardized consolidation tool “SAP Business Objects Financial (ISC ). It covers measures, basic principles and processes for Consolidation” is being introduced in order to further simplify ensuring the effectiveness, efficiency and compliance of the the processes. The processes, systems and controls imple- group accounting. In this context, the aim is to create consoli- mented by Jenoptik do however already currently provide suffi- dated financial statements that conform to the regulations. cient certainty of a reliable Group accounting process that Jenoptik ensures this is adequately achieved with the help of meets the requirements of the IFRS and HGB and conforms to

JO EN PTIK 2010 91 g roup management Report Risk report

the statutory requirements. Independent auditors audit the Risk management in respect of financial instruments annual financial statements of those companies which are sub- The coordination of the Group financing requirements and ject to statutory auditing. KGPM AG Wirtschaftsprüfungsgesell- securing the cash flow are key tasks of Group Treasury. The aim schaft, Berlin, audits the Jenoptik consolidated financial state- of the financial risk management is to limit financial risks arising ments. Reports on relevant questions regarding the Internal from changes in market prices, exchange rates and interest Control System are regularly sent to the Audit Committee of rates through operational and finance-oriented activities. In this the Supervisory Board. The Internal Audit is permanently incor- context, derivative financial instruments are used exclusively for porated within the Internal Control and Risk Management Sys- the purpose of hedging underlying transactions and are only tem through process-independent audit activities. concluded with banks with good credit rating.

The independent Internal Audit department is headed by the Currency-related risks arise as a result of the Group’s interna- Audit Officer of the Executive Board and carried out in the form tional activities. A foreign currency guideline regulates the per- of so-called Jenaudits. The functionality of the Internal Control mitted hedging instruments and permissible deviations. The System is examined by interdisciplinary teams with support risks are identified by Group Treasury and controlled with the from employees from all areas of the Group. One of the key help of appropriate measures. As a fundamental rule, all Group elements in this respect is the proper adherence to and imple- companies must inform the Treasury department of foreign mentation of the guidelines to be applied. Any deficits identi- currency positions on the day they arise so that these can be fied as well as recommendations for potential improvements hedged. Detailed information on this can be found in the Notes are reported directly to those responsible in the audited units as on pages 165 to 169 under point 35. well as to the Executive Board. The categorization of the findings ensures that in case of serious violations the Executive Liquidity risks are identified early with the help of liquidity plan- Board and if necessary the Chairman of the Supervisory Board ning and systematically minimized on a group-wide basis. In are informed immediately and directly. Where necessary, the order to improve the liquidity forecasts, the liquidity planning Internal Audit department is supported by an external auditor. was expanded in 2010 by the addition of a monthly rolling In addition, current special topics can be tackled promptly in liquidity forecast which provides important financial informa- so-called ad-hoc or special Jenaudits. The audited unit in each tion during the course of the year in the event of special devia- case submits a subsequent implementation report stating tions and after the balance sheet date. which of the notified recommendations have been implemented by a given date. Follow-up audits are then carried out, As a result of fluctuations in market interest rates, the Jenoptik during which the implementation of the recommendations is Group is primarily exposed to interest rate risks in respect of reviewed and a report on the results of these sent to the corre- medium and long-term, interest-bearing financial assets and lia- sponding management and the Jenoptik Executive Board. The bilities. All Group assets and liabilities which are sensitive to Internal Audit department reports at least once a year to the interest rates are recorded and analyzed in the interest risk Audit Committee of the Supervisory Board on its key findings management system. Details on how the Group deals with during the period which has elapsed since the last report. In interest rate risks are summarized in the “Interest Policy” guide- 2010, four Jenaudits and six follow-up audits plus one special line. Further details can be found in the Group Notes under Jenaudit were conducted. point 35.

92 JO EN PTIK 2010 INFORMATION for the shareholders Risk report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Market risks: As a result of Jenoptik’s presence in various mar- s

5.2 Individual Risks r de kets, the Group is better able to compensate for sector risks l o h e The development of the Jenoptik risk profile is influenced both and cyclical fluctuations in the individual markets. Therefore, r a

by the general economic situation as well as the internal situa- although the Group business is subject to a range of sector e sh h t tion within the company. The corporate risks determined as sig- risks, there is conversely no significant dependency upon one or f nificant by the risk management system are set out below. single sector. In 2010, the three largest and essentially inde Other, currently unknown risks or those currently deemed to be pendent target markets of aviation and aerospace / traffic, secu-

insignificant might also have a detrimental effect on the rity and defense technology, as well as machine construction / INFORMATION Group’s development of business. automotive accounted for approx. 71 percent of Jenoptik’s total sales. Jenoptik generated approx. 13 percent of Group General economic and sector risks total sales with companies in the semiconductor and photovol-

Jenoptik maintains business relationships in more than seventy taics industry. In the past, the risk had been considered as ment report e countries and generated 59.8 percent of its sales abroad in rather minimal that the markets served by the Group experi- g 2010. The development of the global economy, in particular of ence a simultaneous, strong collapse without any causal events the European economy, therefore has a significant impact on over which Jenoptik has no influence, such as e. g. a dramatic the growth of the Group. Since products and services are pri- collapse in the global economy, wars, natural disasters or pan- Group mana marily geared towards industry and public sector clients, there demics. However, 2009 showed that a worldwide recession is normally a time lag before economic fluctuations have an affecting nearly all sectors can significantly increase market risks impact. which have virtually no correlation between them.

In comparison to the general economic environment in 2009, The 2010 fiscal year was characterized by a positive develop- which was characterized in particular by the financial and eco- ment resp. continuing high levels of demand from the semicon- nomic crisis and, as a result, by a sharp fall in the business cli- ductor industry which primarily determined the course of busi- mate together with reduced spending on investment, the eco- ness of the Optical Systems division in the Lasers & Optical nomic activity and economic indicators improved and stabilized Systems segment. However, in the highly cyclical semiconduc- fiscal year2010.H owever, in view of the high levels of debt in tor market there is the risk of a fall in demand in the 2nd half of the public sector, e. g. in European countries and the US, A the 2011. In the Lasers & Material Processing division, a cautious consequences of their consolidation as well as the loss of approach to investment in systems construction (thin-film solar numerous programs aimed at stimulating economic activity, area), the planned reduction in grants for solar systems as well there is no certainty about the scope and sustainability of the as significant downward pressure on prices in the photovoltaics recovery. Uncertainties and differences of opinion regarding the industry could have a negative impact on business activity. development in the international currency and financial markets However, new applications in the area of crystalline photovolta- therefore still remain and there is the risk of a partial return to ics also offer new opportunities. In 2010, a pick-up in the over- weaker economic growth in 2011. all market and a recovery in demand from the automotive industry, faster than originally anticipated, accelerated the turnaround in the Metrology segment. In 2011 Jenoptik expects a continuation of the recovery in this segment, although it may

JO EN PTIK 2010 93 g roup management Report Risk report

also be accompanied by increasing downward pressure on As a result of the Jenoptik Group’s sound market position, the prices. Within this segment, the Traffic Solutions division oper- risk of losses of market shares in the current environment of ates in what is primarily a stable market in Europe, whilst consolidating markets is offset by the same level of opportuni- international major projects with long lead times and decision ties for improving our own market position. Jenoptik is consis- making processes are becoming an increasing feature of the tently countering these risks through sustainable reduction in non-European markets. This can lead to fluctuations in the fixed costs, a continuing process of internationalization and the order book situation, sales and earnings. The development in development of new national markets, as well as a strengthen- the Defense & Civil Systems segment remained stable in 2010. ing of those areas of business offering higher than average However, in the area of defense technology, Jenoptik is being growth potential. increasingly exposed to the risk of delays in sales with a corresponding negative impact on earnings as a result of budget Corporate strategy risks restrictions. The Jenoptik Group is exposed to corporate strategy risks primarily in conjunction with the future growth of the Jenoptik Jenoptik operates in a fast-moving technological environment Group. The Group can capture market shares both organically in which fierce competition in terms of pressure on prices and through growth, the launch of new products and business margins, consolidation as well as product and service quality models as well as inorganically through acquisitions and coop- are the characteristic features. In each of our core markets, we eration arrangements, mainly in connection with the continu- compete with a handful of companies worldwide. However, ing process of internationalization. The associated risks, includ- the current situation of the global economy and the economic ing the product risks, can have a negative impact on the outlook for markets such as Europe, North America and Asia financial, asset and earnings situation of Jenoptik. The rolling have led to a significant mixing-up of the competitive environ- strategy process, which is closely interlinked with the medium- ment. The risk of a large percentage of our competitors simul- term financial planning process, and the innovation manage- taneously launching new products and technologies on the ment with corresponding roadmaps ensure that potential risks market and, as a result of this, the risk of Jenoptik suffering sig- and opportunities which could have a medium to long-term nificant falls in sales and earnings, is however currently consid- effect can also be identified early and managed. ered minimal. Thanks to customer loyalty programs and the increased presence as a system integrator with an higher share Mistakes in the assessment of future developments can also of value added, Jenoptik is facing up to the trend of primary give rise to a significant corporate strategy risk. In addition, customers towards “second sourcing” and conversely also sees alternative technologies from competitors could represent a risk opportunities for new customer relationships as a “first or sec- of their products replacing Jenoptik’s products. In addition to a ond source”. A few sectors in which Jenoptik operates are change in the market position, this may also result in lost sales going through processes of consolidation which could lead to and amortization of capitalized development costs. Jenoptik is our competitors becoming stronger as well as to a change in intensifying its own development services through research our relative market position and therefore to the risk of impair- cooperation arrangements with industrial partners and universi- ments regarding the value of individual investment holdings ties. Long-term customer relationships enable developments to and goodwill. These factors, in combination with others, can be created in close coordination with the customers. However, together have a negative impact on the financial, asset and the failure of individual product developments to achieve mar- earnings situation. ket success in technology companies can never be fully ruled

94 JO EN PTIK 2010 INFORMATION for the shareholders Risk report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

out, giving rise to potential losses in the single figure million purchase rather than to go ahead with one. In a staged verifi- s r de euro range resulting from the termination of individual major cation process, the Strategy & Business Development depart- l o h e RD + topics. Jenoptik does however consider the possibility of ment conducts a market screening based on the growth and r a

significant detrimental effects on the earnings, financial and respective business area strategy. Legal questions are dealt with e sh h t asset situation as unlikely. In order to limit this risk, Jenoptik by the Legal department – consulting external lawyers as or f conducts thorough checks to determine whether the criteria required. Potential acquisition projects are then discussed with for compulsory capitalization do actually apply. Although the and evaluated by the Executive Board and divisional manage-

measures of our risk management system described in Chapter ment. Jenoptik places high requirements group-wide on any INFORMATION 5.1 do reduce the risk of mistaken assessments, they cannot acquisition or investment decision. either eliminate this risk in full or place precise figures on it. Group-wide, targeted innovation management and ongoing Entry into new national markets entails international business

market analyses in conjunction with continuous research and risks, such as e. g. legal risks. Jenoptik therefore prefers to work ment report e development further limit the risk of bad investment and tech- together with local partners or local management, utilizing g nology decisions. Linking strategy processes with staged inno- existing Group structures and resources. As a longstanding vation processes and RD + roadmapping ensures that cancella- partner who has been representing Jenoptik successfully in the tion risks are minimized. New development projects are Korean market since 2004, Telstar-Hommel for example holds Group mana assessed according to a list of criteria which apply throughout 33.3 percent of the JOIKEN PT Korea Corp. which was formed in the Group, with the result that only the best ideas continue to summer 2009. Since November 2010 Jenoptik has also had a be pursued through to commercial success. In addition to the presence in Japan as a majority shareholder with almost two earnings and market potentials, the crucial factors are the tech- thirds of the shares in the joint venture JOIKEN PT Japan Co., nological feasibility and a risk assessment. Ltd., with the longstanding partner Kantum Electronics holding approx. one third of the shares. We are presently aware that Patent applications, filed both by the Group itself and third par- increased risks associated with the political situation in currently ties, entail risks for Jenoptik through potential litigation as a major sales and production countries exist in the Middle East result of patent infringements or unplanned costs for the pur- and North African region, which may lead to, among other chase of licenses, although these are offset by opportunities for things, orders being delayed or not materializing. revenues from potential licensing to third parties. Because of the legal situation, particularly in the US, A claims of patent vio- As a supplier of defense technology goods Jenoptik is subject lations involving significant claims for damages in some cases to export risks due to trading restrictions. The Group assesses can never be ruled out. However, there is at present only mini- these risks as minimal and regularly counters them by conduct- mal risk arising from current operations. ing comprehensive checks and obtaining export licenses for those products which are subject to approval. In order to fur- The Group’s continuing process of internationalization is ther optimize the group-wide coordination and monitoring of accompanied by acquisitions, cooperation arrangements and a adherence to the export control regulations, an export control focus on the core business. Jenoptik counters acquisition risks guideline which is applicable throughout the Group has been in arising from the integration of personnel, processes and prod- use since August 2010. By scanning and permanently monitor- ucts as well as potentially higher debt levels and long-term ing all the existing purchasing, sales and finance-related activi- assets, including goodwill, through a detailed due diligence ties in the SAP module SAP Global Trade Services, export risks which in the past more frequently led to a decision to decline a within the Jenoptik Group can be identified early and eliminated.

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The risks arising from the sale of parts of companies, in particu- concentration of default risks on individual key customers. lar from the sale of M + W Zander, reduced further in 2010. In However, dependence on individual customers may be higher for addition, Jenoptik has issued the standard guarantees for sales individual group companies. Jenoptik counters the potential client of larger parts of companies such as e. g. Jena-Optronik GmbH creditworthiness risk through consistent accounts receivables or of the minority shareholding in caverion GmbH, amongst management and the management of key customers. Since many other things relating to the accuracy of the tax returns submit- customer orders are based on long-term supply agreements, ted or to the effect that necessary approvals, patents and some of which are based on special developments, the risk of the licenses for the operation of the business have been obtained. termination of a business relationship is further reduced. In principle, claims by the purchaser on the basis of these guarantees may arise in future. There is dependency upon suppliers in a few individual areas for the procurement of special components and the risk of The risk of potential sales losses resulting from the uniform development contracts issued by Jenoptik not leading to the ‘Jenoptik’ umbrella brand launched throughout the Group in required results. Thanks to the Jenoptik product mix, the risk of 2009 has not arisen. The pace of the global convergence under falls in sales and earnings due to delivery bottlenecks with a key one global, uniform logo has picked up. Targeted information supplier is generally low. In extreme cases, supplier problems campaigns and the continuation, for example of the ROT BO can lead to a shutdown in production, lost sales, significantly brand as a so-called ingredient brand, guarantee that custom- higher procurement prices, lost reputation, contractual penal- ers continue to find established names on the traffic monitor- ties, compensation or a loss of follow-up orders and result in a ing systems. negative impact on the earnings of individual group companies. In order to reduce the dependency on individual suppliers, Information risks. In conjunction with confidential information successful countermeasures include, in addition to active inter- on future strategies, technologies or product developments, face management for third party developments, the in-sourcing there is the risk of this information becoming accessible in the of strategic key components as well as the development of public domain in error and, as a result, reducing the level of “second sources”. future sales and seriously jeopardizing our market position. The Group therefore operates safety mechanisms, e. g. the issue of The measures introduced in 2010 further qualify the supplier special cryptographic hardware, the encryption of e-mails and portfolio and reduce the dependency risk. (See Management data files, network separation as well as military security stan- Report page 67) dards and guidelines for the internal treatment of sensitive data. (See IT risks). Procurement risks. Jenoptik does not anticipate any significant price increases in the procurement area, although prices in indi- Performance risks vidual areas may increase, as did partly e. g. the prices for elec- As a result of its presence in various markets, Jenoptik is only tronic components or synthetic quartz in 2010. This excludes heavily dependent upon individual customers or suppliers in a procurements in connection with energy such as fuels and raw few operating areas. Jenoptik generally has a broad customer materials. Germanium is of particular importance to Jenoptik as base and is not dependent upon any single client for its sur- a raw material. The primary consumer is the Optical Systems vival. In 2010, the three largest customers accounted for division. Whilst the prices for this raw material remained rela- 16 percent of sales and 13 percent of the order intake on the tively stable up to October, they increased rapidly thereafter overall Group level. On a group basis, there is consequently no (from 800 $ / kg to 1,350 $ / kg).

96 JO EN PTIK 2010 INFORMATION for the shareholders Risk report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

As a result of the sharp pickup in economic activity in 2010 and Financial risks s r de the associated fact that suppliers were operating at full capac- Jenoptik operates a centralized financial management system. l o h e ity, re-supply times had significantly lengthened. As an integral part of this, the Treasury department is responsi- r a

ble for the control and monitoring of the currency, interest and e sh h t Long-term orders with periods of up to ten years or more are liquidity risks based on guidelines applicable throughout the or f found primarily in the Defense & Civil Systems segment and to a Group. The key objective is to ensure the necessary liquidity at lesser extent in Service Providing in the Traffic Solutions divi- all times.

sion. Whilst stable costing bases and the future capacity utiliza- INFORMATION tion offer the Group good forecasting certainty in these cases, Liquidity risks. The financial flexibility and permanent solvency this is offset by risks arising from what are normally high order of the Group is ensured at all times on the basis of a multi-year volumes, the associated long-term costings, advance payments financial plan and monthly rolling cash flow plan. As a result of

for investments and possibly inflation and currency risks. the capital increase in March 2010, the sale of the minority ment report e Jenoptik reduces these risks with the help of escalator clauses, holding in caverion GmbH, the sale of Jena-Optronik GmbH g on-account payments, currency hedging (see financial risks) and reduction in net debt associated with these activities, the and rolling forecasts. However, these risks cannot be totally liquidity risks for the Jenoptik Group reduced sharply in 2010. eliminated through hedging instruments, particularly in the Thanks to a positive cash flow and liquidity framework in the Group mana case of framework agreements that do not stipulate any bind- form of credit lines and loans yet unused totaling approx. 84 ing purchase quantities by the customer at the end of the million euros as at December 31, 2010, the Group’s liquidity agreement but by contrast do require fixed costings and ear- supply is secured from the current viewpoint. In addition, cash marked resources. In conjunction with anticipated budget pooling improves the liquidity supply to the individual compa- reductions by public sector customers, Jenoptik will in future be nies, thus limiting their liquidity risk. This risk is further reduced faced with the risk of time delays on orders or these orders by having the credit lines spread between a number of banks extending over a longer timeframe. Additional warehouse risks without any one individual bank being dominant. Nearly about are minimized and capital tie-ups reduced through continual 51 percent of the gross financial liabilities at the end of 2010 improvement in the procurement, throughput and sales pro- are linked to financial indicators, so-called financial covenants. cesses. In future, Jenoptik will also benefit to a greater extent In principle, if these covenants are breached there is the risk of from economies of scale as a result of purchasing processes the banks being able to prematurely call in the underlying loans. being increasingly centralized on a group-wide basis. However, in view of the markedly lower net debt as at Decem- ber 31, 2010 and our expectation of a continuing, positive devel- In order to avoid product liability cases, the Group employs opment of business in 2011, a breach of the current applicable stringent quality assurance measures and also operates in financial covenants appears unlikely. The quantitative effects of accordance with the pertinent national and international rules the liquidity risk can be found in the Notes under point 35. and laws. A business and product liability insurance policy essentially covers the residual risk, categorized by the Group as Currency risks: Jenoptik’s balance sheet and group currency is low, and covers virtually all group companies using a global the euro; this is also the accounting currency for a large pro- coverage concept. The US subsidiaries of the Jenoptik Group portion of sales. Approx. 8 percent of Group sales in the 2010 also have local insurance. The special requirements in individual fiscal year were processed in US dollars, only a small percent- countries are therefore taken into account. age in other national currencies.

JO EN PTIK 2010 97 group management Report Risk report

Jenoptik uses exchange rate hedging instruments, primarily Conversely, a weaker US dollar would have a negative effect on forward exchange contracts and currency options, to hedge vir- Jenoptik’s margins. The quantitative effects of the currency risk tually all orders in foreign currencies and in this way reduces are explained in the Notes under point 35. the effects of fluctuations in exchange rates on earnings and cash flow. In order to counter exchange rate risks, derivative There are interest rate fluctuation risks for short-term as well as financial instruments are used exclusively for hedging the oper- long-term loans with short fixed-interest rates if rising interests ational underlying business as well as financial transactions impact on the interest rate of these loans and lead to increased required for operating purposes. In this context, all payment interest expenses. In order to hedge against the risk arising flows in foreign currencies are recorded as a risk item. In order from fluctuating interest rates on income statement as well as to hedge the foreign currency transactions and define the cash flows, interest rate hedging instruments such as interest annual currency hedging strategy, the expected development caps and interest swaps are used for borrowings which involve of the currency, the risk potential as well as a shock scenario variable interest rates. Despite the partial interest rate hedging are then analyzed in order to ascertain the maximum permitted and fixed interest rates, rising interest rates would increase loss risk. Jenoptik’s interest expenses. In the case of long-term, fixed interest rate loans, early repayment entails the risk of early redemp- As at December 31, 2010, the amount of outstanding forward tion penalties. This situation can arise in particular if real estate exchange contracts hedged totaled 42.9 million euros (prev. encumbered with land charges is sold or if the cash in hand on year 36.3 million euros). Future, as yet undetermined US dollar which low interest is paid is used in order to reduce gross debt cash flows for contracts yet to be concluded can only be and the future interest burden. The quantitative effects of the hedged to a limited extent in the form of cash flow hedges. If interest rate risk in 2010 are shown in the Notes under point 35. the underlying business is subsequently not concluded then this entails an additional currency risk. It is also not possible to Default risks. Jenoptik counters the default risk arising from hedge against the risk of competitors with added value in other receivables and loans by conducting comprehensive creditwor- currency zones suddenly being able to submit offers at lower thiness checks, pursuing a consistent approach to receivables cost following currency fluctuations. This could have a detri- management and agreements on on-account payments con- mental effect on the asset, financial and earnings situation of cluded in advance for larger projects. In these cases, credit risks Jenoptik. normally only apply to any balance of the receivable, consequently reducing any impact on the balance sheet. The quanti- Since Jenoptik tends to have a higher level of income than tative effects of the credit risk are explained in the Notes under expenditure in US dollars, the Group benefits from a strongUS point 35. dollar. During the course of 2010, the euro lost ground against the US dollar which, at the end of the year, was at 1.3362 In addition to the refinancing of the purchase price, risks arising EUR / USD, below the level for the previous year (31.12.2009: from put options primarily exist if the specified purchase price 1.4406 EUR / USD). Up to February 2011, the US dollar showed exceeds the market value of the asset to be purchased. With a continuing upward trend (22.02.2011: 1.3665 EUR / USD). In the exception of the real estate funds below, there are currently the event of a stronger US dollar, future order intakes could no put options against Jenoptik for the acquisition of parts of lead to higher euro margins unless the positive exchange rate companies from operational minority shareholders which could effects are passed on in full in the form of price reductions. reduce cash assets or financing sources if exercised.

98 JENOPTIK 2010 INFORMATION for the shareholders Risk report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

As described in the 2009 Annual Report, Jenoptik has three real reduced as at the end of 2010. In total, about 70 percent of s r de estate funds in the real estate area. With each fund the corre- the risks arising from guarantees in the sum of 12.4 million l o h e sponding silent shareholder has an exit opportunity (put option) euros are secured through cross guarantees from other compa- r a

which can be exercised no earlier than 2011, in some cases not nies. Taking into account historic empirical values, these risks e sh h t until later. are therefore fundamentally to be categorized as low. The level or f of utilization over the last five years was on average approx. In the 3rd quarter 2010, the silent shareholder in the first fund 0.02 percent per annum. In addition, there is an obligation on

announced his intention to exit from the real estate company the part of the primary debtor to reimburse Jenoptik for any INFORMATION as at March 31, 2011. If the real estate company is unable to guarantee take-up. Detailed information can be found in the refinance the silent investor’s claims in connection with his exit, Notes on under point 36. Jenoptik would have an indirect obligation to refinance this

amount. There is consequently the risk for Jenoptik of a poten- The Group has only minimum exposure to securities risks in ment report e tial net cash outflow as at the end of the st1 quarter 2011, the view of the low level of its own securities and an overall mixed g amount of which is currently under discussion and has not yet portfolio structure. been definitively calculated.H owever, the risk of deteriorating balance sheet ratios can be further limited and the amount to Personnel risks Group mana be refinanced further reduced through planned sales of real For Jenoptik, qualified and motivated employees are a key fac- estate not required for operating purposes, or by attracting tor for success in an increasingly dynamic market environment. new investors. The other two still existing exit opportunities for As a technology company, the procurement and retention of silent shareholders allow for an exit as at the end of 2011 or know-how is a particularly key element for success. The main 2014. The effect of the abovementioned exit options affecting personnel risks therefore include a shortage of qualified person- cash flow has not yet been clearly determined for Jenoptik and nel, the result in particular of the difficulty in filling national and at maximum will be a low, double-digit million euro sum. international key positions, as well as a lack of performance on the part of employees. Risks arising from guarantees. With the sale of the minority holding in caverion GmbH (formerly M + W Zander Gebäude- There is a medium to long-term personnel risk arising in partic- technik GmbH) and the successful conclusion of the transaction ular from the drop in the number of high school and university in the 3rd quarter 2010, the risks to the Jenoptik Group arising graduates and the associated shortage of trainees. Jenoptik is from sureties and guarantees have sharply reduced. With the countering this risk with a centralized personnel management conclusion of the sale, the financing agreement existing system in which the areas of HR marketing, recruitment, train- between Jenoptik and caverion was terminated and Jenoptik ing and HR development use group-wide programs and activi- released from all existing guarantee obligations directly or ties to make the Group sustainably more attractive as an through corresponding cross guarantee from the YIT Group. As employer. a result, approx. 90 percent of the Group guarantee and cash lines issued in favor of third parties no longer apply. In the area of HR marketing, the risk is being countered by target group-oriented event and communication concepts. This In 2010, all guarantees still existing in connection with M + W has enabled Jenoptik over recent years to successfully enhance Zander expired in full or were reduced. The risk arising from its image as an employer amongst the relevant target groups. guarantees for other companies, in particular for non-consoli- In order to guarantee the quality and attraction of the training dated investment holdings, was also successfully further for school leavers, Jenoptik as a company is working on long-

JO EN PTIK 2010 99 g roup management Report Risk report

term training concepts within the framework of the Jenaer Bil- order to handle IT-aided business processes as securely as pos- dungszentrum gGmbH – Schott, Zeiss, Jenoptik. With the help sible, the Jenoptik’s central IT department conducts continual of high quality, future-oriented training for technical personnel reviews of the Group’s information technologies and updates and close collaboration with universities and student networks, the systems as required. The process of transitioning to a state- the Group is investing in the training and long-term commit- of-the-art Group IT infrastructure in the area of security, avail- ment of its own trainees. The objective is to motivate technical ability and scalability continued in 2010. In this context, top pri- and management personnel through comprehensive training ority is given to data security as well as the design of the IT and development activities combined with performance-related systems and their infrastructure on a redundant basis. An pay and to secure the Group’s commercial success. In this con- e-mail archiving system that complies with the statutory text, the Group’s international orientation is becoming increas- requirements, ERP systems and technical drawings, a central- ingly significant. ized and duplicated computer center as well as hierarchical data backup strategies and data storage are all intended to In order to avoid personnel risks, work on developing a person- avoid in full the risk of data loss in the future. An increasing nel controlling system for the Group was commenced in 2010. number of applications and data volumes are being gradually Central HR key indicators were defined and have been collated. migrated over to this centralized structure in order to guarantee These indicators are reported to the Executive Board for the the necessary security. In 2010, the Group introduced a redun- Group and to the Heads of the Divisions for the corresponding dant corporate network and a central computer center within divisions. The objective is to quickly identify the HR relevant which the critical applications of the local companies will be risks by regularly collating the indicators and being able to initi- gradually consolidated over the next few years. There is how- ate corresponding countermeasures. ever currently still a risk that in the event of a total failure the central computer center could shut down, making disaster In 2011, HR controlling is due to develop the basis for a strate- recovery more difficult. The local computer centers for the gic HR planning concept which is more focused on the needs respective locations will also continue being modernized and and strategies of the divisions and their markets, products and centralized. By using state-of-the-art and ultra-secure technolo- technologies. This should secure long-term HR planning that gies, Jenoptik systematically and continually protects itself not only takes account of the demographic trend but also against damage caused by viruses and hackers. Strict security forms the basis for structured and future-oriented employee regulations such as encryption, token authentication and net- training. work separation ensure, for example, that military classified data is kept secure. A Group Security Manager also ensures IT risks data secrecy at all times. In conjunction with the Jenoptik The operation of computer-aided business processes and the Group’s Data Protection Officers, the processing of personal use of systems for the general interchange of information, con- data is guaranteed to be carried out in accordance with the trolling and financial accounting as well as other IT applications regulations of the German Data Protection Act. The employees in the Group give rise to basic information technology risks if are further sensitized to the need for information security the functionality of these systems is no longer guaranteed. In through training programs and information events.

100 JO EN PTIK 2010 INFORMATION for the shareholders Risk report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

Other risks impossible to totally rule out the risk of our being unable to s r de Potential risks arising from changes in legislation can also not achieve the book value or the value ascertained using the l o h e be ruled out entirely and exist for Jenoptik in the sense that, for abovementioned method. This would result in a negative effect r a

example, a change in the opportunities for utilizing losses car- on earnings with a simultaneous cash inflow (reduction in net e sh h t ried forward would impact on the Group’s earnings situation. debt). There are plans for the sale of real estate not required for or f operating purposes in 2011, although this is dependent upon A Compliance Board was set up in 2010 in order to reduce the market situation. When successful, the Group could offset

potential compliance risks arising from the adherence to appli- the cash outflow resulting from the exit by the silent share- INFORMATION cable law, corporate guidelines and regulatory standards recog- holder from the real estate fund and the negative conse- nized by the company. Although it is impossible to totally rule quences for the earnings situation resulting from the loss of the out any serious breaches by individual employees which have a positive contribution to the EBT I or EBT I DA by the property

significant influence on the earnings, financial and asset situa- could be compensated to a significant extent by future savings ment report e tion, we believe these are unlikely. in interest expenses and lower depreciation. g

Risks arising from legal disputes exist in respect of a claim for There is also a risk of impairment in the event of a permanent compensation before a court of arbitration, since a customer of reduction in the value of minority investment holdings as well Group mana M + W Zander has been claiming since December 2008 that a as the capitalized goodwill of consolidated companies. As the settlement concluded in 2006 with M + W Zander was invalid. underlying corporate valuation is subject to a bandwidth of M + W Zander is rejecting this claim and asserting counter- varying factors, such as e. g. the development of the market, claims. Should the decision go against Jenoptik, there is the risk impairment test are regularly carried out. of M + W Zander or its buyer asserting claims against Jenoptik. However, we view the risk of failure as low. If the counterclaims Risks arising from the development of the organization are of M + W Zander are upheld, there is the chance of Jenoptik derived from the necessary adjustments in the corporate and being able to file a claim for payment. We are not aware of any management structure. Changes are only carried out if these other litigation-related risks that could have a significant impact provide for improved control of the medium-term growth and on the asset and earnings situation of the Group, apart from enable the company to achieve greater success. At this point those dealt with in this risk report, or we believe that these are in time there are currently no significant risks thatJenoptik very unlikely. would normally counter through an active change management process. It is very difficult to forecast the impairment risk for Jenoptik’s real estate assets which are not required for operating pur- Any takeover risk for the Group as a whole is dependent upon poses. These are held as a financial investment and are subject the share price amongst other things. Since around 70 percent to the fluctuations in the rental market, particularly if follow-up of the Jenoptik shares are held in free-float and, according to rentals cannot be procured or these are not procured at the its own statements, ECE Industriebeteiligungen GmbH, which same high rates. The buildings are subject to an annual impair- has held 25.02 percent of the Group since February 2008, is ment test using the discounted cash flow method, which can investing for the medium term, we currently view this risk as lead to an immediate requirement for value adjustment to indi- low. However, as a result of the reduction in net debt and the vidual buildings should there be a change in the rental situa- continuing focus on the core business, this risk has in principle tions. In this context, should individual properties be sold, it is increased slightly. By pursuing active Investor Relations Man-

JO EN PTIK 2010 101 g roup management Report Risk report

agement, Jenoptik addresses a broad investor base and SUMMARY | General statement on the risk situation endeavors to provide transparent information for the whole Jenoptik is aware of its own opportunity and risk profile and capital market in order to continually further reduce this risk. considers this to be appropriate for the company and the current framework conditions. The assessment of the overall risk The monitoring, coordination and assessment of environmental to the Group is conducted on the basis of the risk management risks comes under the responsibility of the Group Environmen- system in combination with the planning, control and monitor- tal Protection Officer. There were no key changes in environ- ing systems used. As a result of our broad presence in the mar- mentally relevant systems and processes in 2010. Consequently ket, we see ourselves as being subject to an overall lower risk there have also been no changes in the environmental risks of from the economic situation in respect to the Group’s eco- the Jenoptik Group against the previous year. Jenoptik is sub- nomic development compared with companies which are ject to environmental risks in part as the result of the use of strongly focused on specific areas. The financial risks, in particu- materials and substances which are harmful to health and the lar the risks arising from guarantees, reduced significantly in environment, such as those used e. g. for existing production 2010 as a result of the sale of the minority shareholding in processes in the manufacture of optics. General attention is caverion GmbH. The capital increase in March 2010 and the paid to conformity with the so-called RoS H Directive and adher- further reduction in net debt through positive cash flows and ence to the European RHEAC Chemicals Ordinance. Environ- the sale of Jena-Optronik GmbH in December 2010 have also mental management systems which have been introduced pro- sharply reduced the liquidity risks for the Jenoptik Group. With vide additional safety at the Jena, Triptis and Wedel locations in the anticipated positive development of sales and earnings, we accordance with international standards. An environmental lia- do not currently see any risks that could jeopardize the contin- bility and environmental damage insurance policy concluded ued existence of the company or which in interaction with for the Group includes environmental risks and provides cover other risks could lead to a long-term, negative impact on the against all the abovementioned risks, from storage, to produc- asset, financial and earnings situation of Jenoptik. With the tion, through to disposal. The financial risk arising from envi- exception of the economic risks as well as the risks and oppor- ronmental damage is therefore categorized as low. tunities arising from a disproportionately high real estate portfolio which is to be reduced in 2011, Jenoptik generally operates within a risk profile which is typical for our company and is inherent in entrepreneurial activities. In addition to our risk management system, the measures highlighted in the report are making a key contribution towards enabling us to exploit future opportunities and successfully meet the challenges arising from potential risks in 2011.

102 JO EN PTIK 2010 INFORMATION for the shareholders Forecast report Group management report consolidated financial statements Notes to the consolidated financial statements additional information

6rc Fo e ast Report

As a result of the sustained recovery in the Germany economy s

6.1 Future development of the economy r de in 2010, the O Ecd recently raised its growth forecast for 2011 l as a whole and of the sectors o h e to 2.5 percent. Nevertheless, according to the Bundesbank, the r a

1st quarter 2011 is showing signs of a cooling in the economy e sh h t Fu ture development caused by the weaker demand for industrial goods. In the sec- or f of the economy as a whole ond half of 2011, GP D could get back to the pre-crisis level in The growth dynamic of the global economy slowed slightly at the opinion of the Hamburg Global Economic Institute. The O Ecd expects continuing, solid growth of 2.2 percent for the end of 2010. Although the global upturn is expected to INFORMATION continue in 2011, it will be at a noticeably slower pace. The 2012. According to the Federation of German Wholesale, For- reasons for this given by the O Ecd are the ending of the pro- eign Trade and Services (A)BG , the German export industry is grams aimed at stimulating the economy as well as a slow- likely to report a record year as the value of exported goods in

down in manufacturing and trading momentum. The O Ecd 2011 should exceed one trillion euros for the first time. The ment report e anticipates global growth of 4.2 percent for 2011, with growth investment climate also remains favorable: capital expenditure g in the O Ecd states of 2.3 percent. Forecasts for 2012 see the on equipment in 2011 will rise by 8 percent according to the return to a pickup in the pace of development with global German Ministry of Trade and it expects the number of unem- growth of 4.6 percent and 2.8 percent in the O Ecd states. ployed on average to remain below the 3 million level at 2.94 Group mana million in 2011. Economic growth in the USA is expected to continue in 2011, but at a more moderate current forecast rate of 2.2 percent. The economic recovery in Japan is very sluggish. According to The O Ecd predicts growth of 3.1 percent for 2012. The con- the IMF, the Japanese economy will continue to perform below tinuing theme on the agenda will be the high level of sovereign its potential in 2011. The O Ecd estimates that global economic debt. Programs of cutbacks are intended to combat this prob- growth in 2011 will be just 1.7 percent and is expected to slow lem. This could have negative consequences for economic further in 2012 to 1.3 percent. development. According to forecasts, China will continue to record the high- As a result of the high level of sovereign debt, the upturn in the est economic growth in the world over the next two years – euro zone is also only expected to be moderate according to with the O Ecd forecasting 9.7 percent for 2011 and 2012 the International Monetary Fund (IMF) and the pace of the respectively. Nevertheless, China will endeavor to put the pick-up uneven. Growth, particularly in Greece, the Irish Repub- brakes on the upturn and therefore head off any overheating, lic and Italy will be far below the average for the euro zone particularly in the level of lending and in the real estate market. which the O Ecd forecasts at 1.7 percent. For 2012, the GP D of the euro zone is predicted to grow by 2.0 percent. In addition The O Ecd predicts that India will also remain one of the driving to the currency tensions, the high level of sovereign debt forces for the global economic recovery over the coming years. remains the greatest risk to the economy. Expanded cost cut- Whilst estimated to be 8.2 percent and slightly weaker than in ting packages could dampen down economic activity. 2010, economic growth in 2011 is expected to rise again in 2012 to 8.5 percent. According to forecasts by the O Ecd, Bra- zil’s economy will expand by 4.3 percent in 2011 and 5 percent in 2012. Russia is not expected to return to the growth rates in the pre-crisis years over the next two years.

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Fu ture development of the Jenoptik sectors 2010 and consequently anticipates sales of approx. 38 billion In many cases, there is a link between the forecasts for devel- US dollars. From 2012, the sector should then start to grow opments in the individual sectors and the development of the again at an anticipated rate of approx. 12.1 percent. Gartner economy as a whole. As illustrated, there is uncertainty here forecasts growth of 4.6 percent for 2011, to 314 billion US dol- both with regard to the global economy as well as for individ- lars, whilst the sector association S IA is anticipating a rise of ual nations and regions, particularly as a result of the high level 6 percent in 2011 and 3.4 percent in 2012. of sovereign debt, volatile financial markets and rising raw material prices. The sector organizations and experts are basing The developments in Germany and Asia will set the trend for their sector forecasts on the assumptions – unless specified the photovoltaics sector in 2011. As a result of the boom in otherwise – that the economic recovery in the global economy Asia, the number of solar systems installed worldwide is will continue and that there will be no fundamental currency, expected to rise by nearly 40 percent to 22.2 Gigawatts sovereign country or financial crises. according to the market research conducted by iSuppli in 2011 – despite the reductions in grants in Germany, France and The global market for optical technologies is expected to grow Spain. The photovoltaic equipment manufacturers are looking at an annual rate of approx. 10 percent up to 2015 according at a strong growth year ahead. The market research institute to an analysis by DZ BANK AG. The total market volume is Solarbuzz expects production capacities in 2011 to rise world- therefore anticipated to rise from 300 billion US dollars in 2010 wide by an anticipated 60 percent. Sales by the equipment to nearly 530 billion US dollars in 2015. However, the recovery manufacturers should increase to 11.7 billion US dollars, pri- is predicted to continue at differing growth rates in the individ- marily as a result of the high demand from Asian manufactur- ual sub-segments. According to DZ BANK AG, the lighting sec- ers. However, Solarbuzz sees overcapacity in the supply of crys- tor in particular is expected to achieve faster growth as a result talline silicon modules in the first half-year 2011. In addition, of the increased use of LEDs, especially in the automotive area. the plans for expansion by the thin-film manufacturers lack precise detail. By contrast, German manufacturers of photovoltaic The upward trend in the global laser market is also forecast to systems are optimistic and based on a VDA M survey expect to continue in 2011. The analysts of Laser Focus World (LFW) see sales increase by 19 percent for 2011. expect to see sales grow by 10.8 percent to 7.05 billion US dollars. For the laser materials processing sector, the LFW forecasts There is continuing optimism in the medical technology sector. growth from 2.2 billion US dollars in 2010 to 2.5 billion US dol- The market will grow in the long term, helped by the aging lars in 2011, exceeding the level of sales in 2008. The markets population in the industrialized nations and rising prosperity in for medical and military lasers are also expected to expand fur- the emerging countries. The Electromedical Technology Associ- ther in 2011, by 13 percent and 9 percent respectively. ation of the German Electrical and Electronic Manufacturers’ Association ( )ZveI predicts marked single figure growth for With record sales, 2010 was the strongest year so far for the 2011 in Germany but does point to correction effects in Ger- semiconductor equipment manufacturers. The analysts’ firm of many as the economic development support program II comes Gartner expects to see stagnation in 2011 at the high level of to an end.

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In German machine and plant construction, the German Engi- The strong economic upturn in the international aviation sector s r de neering Federation (DA)V M anticipates moderate but steady will take a pause in 2011 according to the International Air l o h e growth. Production is expected to rise by approx. 10 percent in Transport Association IATA. Although the IATA raised its profits r a

2011. However, this will still leave the sector 9 percent below forecast for 2011 from 5.3 billion US dollars to 9.1 billion US e sh h t the record level in 2008. According to details from the sector dollars, there will be regional variations in the growth levels. or f association ZVEI, the electronics industry is also likely to con- Whilst the Asiatic-Pacific egionr is expected to report the high- tinue its recovery. After recording an increase in sales of 14 per- est profit levels, the market for internal European flights will ZVEI forecasts a 7 percent cent to 165 billion euros in 2010, the remain weak. The main reasons for this are the euro debt crisis, INFORMATION increase in production to 175 billion euros in 2011. a comparatively slow level of economic growth, government programs of cutbacks as well as the higher levels of taxation in The Verband der Automobilindustrie (D)V A expects a good Europe. Rising oil prices are also seen as a risk. In the global air-

2011 for the German automobile construction industry and its craft market, the manufacturers Airbus and Boeing see a global ment report e suppliers. New vehicle registrations in Germany are put at demand for at least 26,000 aircraft over the next 20 years. This g 3.1 million units according to the organization, compared with corresponds to an average growth rate of 4.8 percent per 2.9 million in 2010. The continuing dynamic demand from annum. The high level of demand is being created in particular abroad should ensure another year of record German exports by dynamic growth in China, India and Latin America. The Group mana of around 4.4. million vehicles. The key trends in the sector are trend toward more fuel saving models is also increasing the hybridization, electric drives and the switch of market focus optimism within the sector. towards emerging countries. Suppliers run the risk of insolven- cies as a delayed effect of the crisis which has now actually In the security and defense technology market, the trend been overcome. toward steadily increasing military expenditure will continue. Following an anticipated slight reduction in growth to 3.5 per- Traffic solutions. Traffic accidents cause significant economic cent in 2010, the experts of Frost & Sullivan expect stable sales damage worldwide. According to information from the World in 2011 and a return to continual global growth for 2012. Health Organization (H)W O , each year 1.3 million people die on There will be spending on upgrading, particularly in Asia and the world’s roads. According to calculations by the Federal the Middle East. With exports to these regions, the arms indus- Institute for Road Transport, in Germany alone road traffic acci- try could compensate for the pressure to produce savings in dents caused economic losses of 31 billion euros in 2008. The the Western European states. In Germany, the military budget Commission for Global Road Traffic Safety estimates that every is expected to be reduced by 8.3 billion euros by 2013, with US dollar invested in traffic safety can save up to 20US dollars France and Great Britain planning cutbacks of 5 billion euros in accident costs. and 5.5 billion euros respectively. The US A is also looking to make savings in projects and troop strengths in the sum of 78 billion US dollars over the next five years.

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6.2 Future development of the growth accompanied by a lower proportional rate of develop- Jenoptik Group ment in cost of sales and fixed costs. As a result, earnings are expected to increase more sharply than sales, and the profit margin will increase progressively. The Jenoptik Group is keeping to its medium to long-term growth targets. Sales, including acquisitions, are expected to This ties in with the core tasks and objectives of future develop- rise to 1 billion euros and the EBT I margin is forecast to come ment along the five value levers: to between 9 and 10 percent. However, there has been a delay of two years due to the economic and financial crisis. Organic growth: All growth options have been defined, steadily developed and evaluated in the divisions and therefore for the Growth and the improvement in profitability rest on two pillars: Group as a whole. In future, support is to be provided by inten- 1. good sales conditions for the Jenoptik product range over sified business development. Medium-term areas of focus for the long term and development in the segments are summarized from page 107. 2. the further development of Jenoptik on the basis of the five Jenoptik is also very closely monitoring the environment with value levers, complemented by acquisitions that round off regard to potential acquisitions. The aim of each acquisition is the product range and / or regional presence. to open up new markets or increase profitability through the use of synergies. At the same time, the product range should We see good sales conditions for Jenoptik products in the long be increased and thus the value chain and / or international term on account of our comprehensive product and technol- presence be rounded off. ogy portfolio directed at attractive growth industries. Optoelec- tronics, our core area of expertise, is a cross-sectional technol- Market and customer-orientation: Processes that are responsive ogy. It makes possible new applications that meet important to customers and markets are to be further created and future challenges and are therefore among the long-term expanded from development through to distribution. As far as growth areas. An overview of Jenoptik products can be found possible, customers are involved as early as the initial develop- in the Management Report on page 66. ment stages. The new product development processes established in two divisions in 2010 will start to take effect from Further development of Jenoptik 2011. Management of the product portfolio will be intensified The further development of Jenoptik will take place on the in all divisions to even better reflect the real requirements of basis of the five value levers which have been our strategic the market and customers in new products. The systems busi- guidelines since 2007. The strategic restructuring and the mea- ness, with which we are establishing ourselves as a long-term sures to overcome the economic and financial crisis are having partner, will continue to be developed. In addition, sales exper- an impact, as the results for 2010 have shown. tise and presence are at the heart of coming activities and will be continuously expanded across all divisions, and especially We still see potential for the years ahead resulting from both abroad. We are continually working on a clear and unmistak- the measures already implemented in the Group and the new able brand profile for the Group as a whole. process improvements along the value levers. With increasing operational excellence, cost savings are expected to continue Internationalization: Strong potential for growth exists particu- in absolute terms or relative to the development of sales. In the larly on foreign markets for Jenoptik. At the present time, we coming years, increases in efficiency and with them rises in are not yet sufficiently represented in all our key sales regions. profits are also expected to increasingly result from sales The development of our activities, in particular in Asia and the

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US, A is continuing. Here, we are making sure to achieve a Future development in the segments s r de majority presence, in part together with local partners. In addi- For the future development in our segments, we assume that l o h e tion to application centers in which our technology-intensive the global economy and the markets will continue to recover r a

systems are demonstrated on site, we develop products and from the financial and economic crisis, but that the pace of e sh h t business models tailored to region-specific requirements and growth in 2010 cannot be maintained in all sectors in the com- or f strengthen our international presence with excellent service ing years, as this growth was also relative to the low level of and support. However, Germany and the US A will remain our the crisis year 2009.

centers of production for the foreseeable future. INFORMATION In the Lasers & Optical Systems segment, we expect growth in Employees & management: The steady training and develop- the coming years, both from an expansion of the systems busi- ment of employees continue to be a key element of strategic ness and the concentration on key customers as well as from

HR work and were underpinned with the main subject of proj- new products, applications and further internationalization. ment report e ect management and the intensive continuation of the junior g management program in 2010. Further key training programs, The Lasers & Material Processing division is one of the world’s which will bring together and network employees on a range few suppliers to offer a complete technology chain and can of platforms, are planned for 2011. This also applies to manag- thus optimize primarily critical interfaces in module and system Group mana ers, for whom HR development measures at the individual or integration. Here the division attaches importance to an appro- general level will continue to be carried out in 2011. These priate price-quality ratio. The areas of focus are cost-optimized measures are underpinned with potential analyses to ensure production and energy-efficient solutions for the customer. demand-oriented development is possible. One of the focal Medical technology and material processing are the priority in areas of strategic HR work in 2010 was implementing central the Lasers business unit. Beyond direct applications, the division HR controlling. This forms the basis of strategic and forward- is concentrating on the further development and improvement looking HR planning, and its establishment will be advanced of the pump properties of their laser and diode bars, in parti intensively in 2011. To record personnel data optimally in the cular for pumping fiber lasers. A new and more powerful infra- future, interfaces will be improved and processes defined with red thin-disk laser for photovoltaics and micromaterial process- the help of a project. ing was also launched on the market and will be integrated into the new laser processing systems for crystalline photovol- Operational excellence: This, still the most important value taics. In the field of thin-film photovoltaics,Jenoptik is working lever, runs through every area of the Group. The Jenoptik Excel- hard on internal processes in order to regain its target margins lence Program is entering its third year and is expected to in the light of competition in which price is a central factor. become a “permanent improvement process” at division level. Laser processing systems for three-dimensional metal working, Numerous ongoing and future projects in the Group continue which are expected to lead to initial sales and earnings in 2011, to focus on the subjects of lean operation and administration, were also new in 2010. For its continuing internationalization, purchasing and supply chain management and shared services. the division will focus on North America and Asia in the One of the key subjects for the next two years is harmonizing medium and long term. Direct distribution and application cen- the ERP systems for enterprise resource planning as the founda- ters, in particular, are due to be expanded. tion for comparable and clearly structured processes.

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The Optical Systems division is a total provider from optical sion is strongly represented in Asia and thus in the region that components all the way to integrated optoelectronic systems. will show the strongest market growth in future. The capacities Depending on customer requirements, it draws on its compre- that were adjusted in 2009, the optimized site concept and hensive development and production expertise and is thus in a the organizational splitting up of project and standard business position to supply tailor-made systems. The development of the already resulted in improved cost structures and a return to semiconductor industry will continue to be of key importance profitability in 2010. In terms of products, Jenoptik continues to its business development. Following the upswing in 2010, to concentrate on flexible measurement technologies and sustained strong demand is expected for the first half-year systems, which combine various technologies and / or different 2011. The division’s dependence on this sector of industry is measurement tasks, as well as on optical and in-process due to diminish in the following years. To this, the expansion of metrology. the systems business, new applications and markets that were opened up in 2009 and 2010 and will in future contribute to The TrafficS afety division is well-placed internationally. It oper- the growth of the division, will also make a contribution. These ates in a market increasingly defined by major international include, among others, lighting and security technology, sensor projects and therefore by long lead times. The trend on major technology for the automotive industry as well as the market projects is toward a combination of equipment business and for laser material processing. On the international stage, the service providing. This can lead to fluctuations in the order division continues its focus on its strategically most important book situation. The division seeks to counter this with a flexible foreign market, the US, A where it is present with its own pro- system of production and the standardization in its product duction capacities, which were considerably expanded in 2010. portfolio. The objective remains to win larger projects over the Asia is also at the heart of the division’s internationalization. years ahead, primarily in non-European foreign markets. The divi- Here, it makes use of the existing infrastructures of other division’s broad international presence will be primarily expanded in sions. important key markets with its own structures. In addition to established products, Jenoptik also focuses on new technologies In the Metrology segment, a strong recovery in business was and concepts, for example 3D radar technology or the identifica- seen in 2010 and will remain steady in the medium term. Here, it tion of average speeds over a defined section of road. is important that Jenoptik continues to expand its good current market position both in industrial metrology and in traffic safety. The Defense & Civil Systems segment is benefitting from a The Industrial Metrology division is particularly subject to strong largely stable environment and is characterized by long-term competitive pressure in the context of consolidating markets. orders with long lead times. Obligations to make savings and recently adopted economy measures could lead to projects that In the Industrial Metrology division, we assume that the market have already been awarded being extended over a longer environment will continue to recover in 2011 and that pre-crisis period of time. The scope and implementation of the economy levels will probably again be reached in 2013 or possibly as measures in public defense budgets, which were discussed and early as 2012, earlier than originally expected. The division in part adopted in almost all Western-style countries in 2010, focuses on production metrology for the automotive industry could influence the development of the segment. In the and has the edge on the competition with its complete range medium term, the objective is to increasingly address foreign of measuring technologies, a broad international presence and markets. The initial focus here will be the US market. In addi- market leadership in the field of optical shaft measurement tion, markets not dependent on national budgets are due to be technology. Alongside the US, A which is increasingly focusing opened up for security products. The fields of energy and sen- on gas-saving and low-emission engine technologies, the divi- sor systems are the priority here.

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HR management: We encourage and challenge our employees s

6.3 Future development of the r de and management, focusing on training, international manage- l business situation o h e ment structures, increasing flexibility, clear career paths, an r a

incentive system geared toward the Group targets and exper- e sh h t Jenoptik is keeping to its long-term targets. However, the finan- tise in change processes. or f cial and economic crisis has resulted in a delay in attaining them. The measures implemented also in connection with the Anticipated development of key indicators

crisis will take the Jenoptik Group forward. in 2011 and 2012 INFORMATION For 2011 and 2012 as a whole, we assume that the Jenoptik Long-term targets Group will be able to further increase sales and earnings. Sustainable growth. In the long term, the objective is for Group The fiscal year 2009, with its sharp decline, and the year 2010,

sales to increase to one billion euros. This is to be achieved with its welcome corrections, were influenced by the financial ment report e through organic growth and acquisitions that will increase the and economic crisis and the following upswing. For 2011 g Group’s profitability and reasonably expand the product portfo- and 2012, we continue to assume a positive development of lio as well as its international market presence. The Group EBT I business. margin is expected to improve to between 9 to 10 percent in Group mana the medium term. Against this backdrop, the information provided below is given on the prerequisite that the economic situation develops in line Focus on cash flows: Organic growth and the investment with the economic forecasts given under Point 6.1. and does required for this is be achieved primarily with the Group’s own not significantly worsen. All of the following statements on the financial resources.C onsequently, positive cash flows from future development of the business situation have been made operating activities and positive free cash flows are key objec- on the basis of current information. tives of the Jenoptik management. This was possible even in the crisis year 2009 and also in the growth year 2010, contrib- Information on expected financial results and comparisons uting to a considerable reduction in net debt. Measures focus- relate to the key operating indicators achieved in 2010, excluding on cash flows such as active inventory, receivables and ing one-off effects. In contrast to the long-term sales targets, capital expenditure management will continue to be pursued. possible acquisitions are not taken into account in the forecasts. In the actual figures for 2010, the loss of sales amount- In the expansion of international business, high-growth regions ing to 31.9 million euros and the positive contribution to earn- are at the center of our activities. To the extent possible, inter- ings amounting to 2.9 million euros by Jena-Optronik GmbH nationalization is being achieved via direct presence which all must be taken into account. areas of the Group can use. The objective remains the continued expansion of Jenoptik’s market position, particularly in North America and Asia. Other markets will be opened up as per the requirements of the operating business areas.

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The planning assumptions for our three segments as at the • In the Traffic Safety division, we assume that we will again beginning of March 2011 are as follows: succeed in acquiring important major international orders. As a whole, we see a continuing positive market sentiment Lasers & Optical Systems segment: both nationally and internationally, as it is the goal all over • In the Lasers & Material Processing division, we expect con- the world to minmize the number of accidents and fatalities tinuing high demand for our lasers, for both direct applica- and reduce the high costs resulting from these. We see tions in defense, medical technology and especially in opportunities over the competition in our complete technol- material processing as well as for diode lasers used as pump ogy range and leading position in the equipment business. sources. The positive development for lasers used in medical Risks are primarily present on politically-motivated major proj- technology is expected to continue with the division aiming ects to the effect that the decision-making processes can be at expanding its market shares. In Laser Processing Systems, delayed. we particularly see opportunities in the field of crystalline photovoltaics and metal working. We anticipate growing Defense & Civil Systems segment: demand abroad, in particular from the Asian market. Pres- • Despite shrinking defense budgets, we continue to expect ence in Asia and the US A is to be expanded in order to be stable development as there is relatively high planning secu- able to offer customers better local support. rity on account of long-term contract awards. For 2011 and • In the Optical Systems division, we expect continuing high 2012, we continue to assume a stable course of business, in demand from the semiconductor industry in the 1st half-year, which foreign orders will account for a somewhat greater which may slow somewhat during the 2nd half-year. Stimuli share than in previous years. for new business outside the semiconductor industry are primarily expected from abroad. Our strategy of establishing The Jenoptik Excellence Program is being continued throughout ourselves as a long-term system partner and working closely the Group. However, it is increasingly losing its project nature together with key customers is due to increasingly translate and becoming a part of constant internal process improve- into sales and results from 2011. ments. The central project office will continue to monitor the individual measures. In 2011, the program is due to result in Metrology segment: further cost savings in the mid-single-digit million euro range. • The Industrial Metrology division is expecting a sustained After the saving and liquidity effects of 2009 and 2010, which recovery of the automobile market, which may mean a return chiefly came from short-term effects in purchasing manage- to pre-crisis levels of 2007 / 2008 as early as 2012 / 2013 and ment felt quickly, the proportion of cost savings from more effi- thus earlier than anticipated. A boost to sales is primarily cient processes as a whole and in particular from production is expected from the above-average growth in the BI R C coun- continuing to rise in the course of the program. In 2011 and tries. In the US, A the division intends to profit from the grow- 2012, the implementation of lean principles and the standard- ing trend toward low-consumption motorization. ization of processes in all areas of the Group will remain the priority.

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Anticipated business position. On the basis of the given Strategically, we are benefiting from our considerably expanded s r de assumptions and planning as well as the expected cost savings, international market presence, our portfolio focused on profit- l o h e sales and Group EBT I are expected to rise further in the next able core markets and improved cost structures. r a

two years, with EBT I increasing more sharply than sales. In e sh h t addition to the expected and sustained general recovery in the The lost sales from Jena-Optronik GmbH are expected to be or f economy and a continuing high level of demand for German offset in the fiscal year 2011. Group sales will then come to at machinery and systems, our market-based business develop- least 510 million euros (2010 sales without Jena-Optronik:

ment is driven by 478.8 million euros). Sales are also due to continue growing INFORMATION • high demand from the semiconductor industry and our organically in 2012. Contributions will come from all the three increasing share of added value here, segments: • the recovery of the automotive market, which is happening

faster than expected, Lasers & Optical Systems segment: Double-digit annual percent- ment report e • the trend toward greater traffic safety, particularly in emerg- age growth in sales is the target of the Lasers & Material Pro- g ing countries and the Middle East, cessing division. Following subdued development in 2010, the • a recovery in thin-film photovoltaics and the expected growth Laser Processing Systems business unit started the year with

in demand for processing machines for crystalline photovoltaics, a considerably higher order backlog than in the previous year Group mana • sustained high demand and new applications in medical following increasing numbers of incoming orders since the technology, as well as 4th quarter 2010. After a considerable jump in sales in the Opti- • the increasing need for security, whether in the political or cal Systems division with an increase of over 20 percent, we personal environment. assume a further rise in sales despite an expected slight slow-

51 Targets of the Group and Segments (in million euros)

Trend 2012 Actual 2010 Target / Trend 2011 compared with 2011 Group sales 479 1) at least 510 slightly rising Lasers & Optical Systems segment 189 > 195 rising Metrology segment 114 > 120 slightly rising Defense & Civil Systems segment 174 1) > 180 stable Group TEBI 29 1) > 35 rising Group order intake 535 1) slightly rising slightly rising Net debt 79 stable slightly falling Free cash flow 33 stable slightly rising Equity ratio 44.9 % slightly rising slightly rising Balance sheet total 629 > 590 slightly rising Employees 2,951 approx. 3,050 slightly rising Capital expenditure 15 approx. 30 slightly rising Interest result – 12 – 12 slightly rising

1) continuing business divisions

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down in the semiconductor industry for the 2nd half-year 2011. income as a result of a low credit interest rate. There are no Sales growth is expected to come from an increase in our plans to increase the interest income through short-term, high- added value, the acquisition of new customers, new applica- risk investments. In addition to acquisitions and capital expendi- tions and new markets. ture, the free liquidity is also to be used to repay long-term loans, but due to prepayment penalties, this will only start to reduce Metrology segment. In the Industrial Metrology division, the interest from 2012. Furthermore, earnings from guarantees will end of the automobile crisis was primarily reflected in the sales drop as a result of the discontinuance of lines of guarantee to for the 2nd half-year 2010. In light of sustained high demand, the benefit of caverion GmbH, in which Jenoptik sold its share in Jenoptik expects sales growth in this division of 10 percent or 2010. slightly above. Following a project-related boost to sales in 2010, the TrafficS olutions division is expecting to maintain or The order backlog of the Group as of December 31, 2010 slightly improve its level of sales. A condition of this is that the already accounts for approx. 45 percent of sales for the current division succeeds again in winning a major international con- fiscal year 2011. Adjusted for the sale of Jena-Optronik GmbH, tract in the 1st half-year 2011. the Jenoptik management is again expecting a rise in order intake for 2011. A more detailed forecast is not possible due to Despite cuts in defense budgets, the Defense & Civil Systems the increasing significance of major orders. segment is expected – adjusted for the divested space business – to develop stably through growth in civil markets and strong The number of employees is expected to rise slightly to approx. demand for energy systems. 3,050 in the current fiscal year. This emerging upward trend is also due to continue in the coming year. Personnel expenses In fiscal year 2011 Jenoptik plans to increase its Group EBT I by are in future expected to develop at a disproportionately lower at least 20 percent and thereby further raise the quality of its rate than the expansion of business. earnings. The Group EBT I will come to over 35 million euros and grow at a faster rate than sales (EBT I 2010 without Jena- Anticipated financial position. The Group financing is secured Optronik: 29.0 million euros). The improvement in EBT I is also by free credit lines as well as cash and bank credit balances. expected to come from all three segments in 2011. In addition Active inventory and receivables management will be steadily to the positive development of the market, in both 2011 and pursued in the coming years, so that positive cash flows should 2012, the largest earnings effects are due to come from the again be in the double-digit million euro range despite the ongoing cost-saving measures and more efficient processes. expansion of business. Despite the increase in capital expenditure and planned growth, the operating free cash flow is On account of the long-term financing structure, interest expected to again be positive. expenses will remain largely unchanged in 2011 and only appreciably fall as a result of repayments from 2012. The lower With regard to financing, parts of medium to long-term loans net debt has a disproportionately low impact on the interest will become due in 2011 and will be repaid out of current cash flows as well as, in smaller part, refinanced.

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Approx. 43 million euros of long-term financial liabilities are Regarding the future policy on dividends, the Jenoptik manage- s r de real estate loans. For 2011, the sale of real estate that is not ment is of the opinion that a solid base of equity is of key l o h e required for operating purposes and is held in separate real importance for sustainable growth. This is seen against the r a

estate companies is planned. Silent investors hold shares in the background of the remaining gross debt of 145.4 million euros e sh h t real estate companies. The cash inflow from the sale of real and the result of both the experience of the recent financial or f estate is to be used to repay existing financing arrangements, and economic crisis, which weakened the equity positions of including the financing of the exit of part of the silent investors. many companies, and the technology environment in which

In the case of a sale, the long-term and short-term liabilities fall Jenoptik specifically operates. In addition, the sale of the space INFORMATION with a simultaneous decline in real estate assets, which is pre- business, which is currently shown as a cash balance, opens up dominantly shown in the form of investment properties on the the possibility of acquisitions. balance sheet. EBT I shortfalls as a result of lost rental income

will in part be offset by a reduction in interest expenses. As a In addition to the liquidation of existing finance arrangements, ment report e result, the impact on the net profit will be minor. a future dividend will in particular also depend on the extent to g which Jenoptik’s liquidity can be usefully invested in growth Not accounting for any acquisitions, net debt is expected to fall and acquisitions and, in the process, the high loss carried for- further in the medium term from 2012. Fluctuations in connec- ward can be used effectively. Every year, the Executive Board Group mana tion with the disposal of real estate not required for operating and Supervisory Board will re-examine whether the payment of purposes and the exit of silent investors are, however, possible a dividend to Jenoptik shareholders is possible and value- both in the course of the year or also between individual years. enhancing.

Due to the 2009 net loss at JOIKEN PT AG, which could be off- The level of capital expenditure in 2011 will be considerably set in 2010 through withdrawal from capital reserve, a net higher than in the last two years. This will be continuously profit of 0 million euros is shown on the annual financial state- accompanied by intensive investment controlling and is directly ments 2010 of JOIKEN PT AG. For this reason, no dividends related to new capital expenditure for specific orders. In total, can be distributed for the fiscal year 2010. The target for the volume of capital expenditure is expected to be approx. 2011 / 2012 is to create the prerequisites to be able to pay a 30 million euros in 2011, compared with approx. 15 million dividend. euros in 2010. This includes larger projects, such as the construction of a production facility for the Defense & Civil Systems division at the Altenstadt (Bavaria) site. Production capacities will continue to be expanded in 2011 and beyond, among others in the Lasers & Material Processing division.

JO EN PTIK 2010 113 g roup management Report Forecast report

6.4 Opportunities General statement on future development We see a positive economic environment at the beginning of Company-specific opportunities for Jenoptik result from the 2011. Nevertheless, the political world as well as market partic- product portfolio, which builds on our core area of expertise, ipants on the financial, commodities and capital markets are optoelectronics. Jenoptik thus operates in a technology envi- nervous. In addition, there are at present political upheavals in ronment that enables new applications and has high entry bar- the Arabian world. Market information is increasingly leading riers. With its presence on a wide range of markets, Jenoptik to erratic reactions with a short-term focus. This makes reliable can also cope better with economic fluctuations than compa- forecasts on the development of our markets more difficult nies operating in just one market. In addition, opportunities than in previous years. As a whole, however, we look to the arise from economic development of the coming 24 months with opti- • internationalization, which we are primarily advancing in Asia mism. Jenoptik particularly intends to profit from the German and North America, export boom and the ongoing internal improvements in cost • our highly skilled employees in all locations, structures and processes. • the importance we attach to our key customers and our close cooperation with them, The Jenoptik management is keeping to its medium-term to • the gradual entry into the systems business and the conse- long-term corporate targets. The objective is sales of one billion quent increase in our added value, euros with an EBT I margin of between 9 and 10 percent. The • our uniform global brand and financial and economic crisis has delayed this development but • developments, cooperation agreements and partnerships also helped to optimize structures and processes more quickly within the markets as well as our own intensive target- than in boom periods. The prospects for growth are good, with oriented research and development. regard to both the economic conditions and the corporate basis. A key objective is to increase profitability sustainably. At the same time, Jenoptik today works on a solid financial basis: net debt is at 79.3 million euros and has approximately halved since the end of 2009; the Group is continuously generating positive cash flows.

This positive overall development is expected to continue in the next two years. We are confident of being able to achieve our planned growth in sales and increase Group EBT I at higher rates than sales.

Jena, March 10, 2011

Michael Mertin Frank Einhellinger Chairman of the Executive Board Member of the Executive Board

114 JO EN PTIK 2010 T 118 117 1 for and Jenopti 121 1 171 165 148 143 140 138 128 17 174 172 Jena- dance with separately inthe with N 16 20 2 he size and structure of the the of structure and size he s s d s Ob o n n s h a g s e otes. Ba C no ta ta ta eg up xe F onsolidated financial statements financial onsolidated cc et is th ot ot er B lance sheet lance li iscal Year 2010 Year iscal tes to the consolidated financial statements financial consolidated the to tes torical summar torical tement of movements in shareholders‘ equit shareholders‘ in movements of tement income comprehensive of tement tement of cash flows cash of tement cutive Board Board cutive ails of the the of ails ervisor ment reporting ment man man ounting policies ounting er notes er es to the income the to es comprehensive of statement the to es gator O IFRS N ptr I C nformation ontheshar ot or y y a 2hasbeenincluded. B porate porate k onik nd supplementar nd b oard al G

es ro ance sheet ance IFRS C up structure up y G on o ov G f financial data financial f ernance ernance 5,as“ mb S solidated solidated tatement of y d H C isclosures under under isclosures od , soldin e D iscontinued y

D N HG C T e-based paymentinaccordance ecember 2010,ispr B F ot o allowforabettercomparability ompr in es are equivalent to last year’s year’s last to equivalent are es ancial ancial O ehensive perations” ineachcase. N ot S es to the consolidated financial statements financial consolidated the to es ta I ncome inaccor c tements tements onsolidated financial statements financial onsolidated IN FORMATION esented G roup management report management roup J ENOPTI additional information additional f or the shareholders the or K 2010 K - 115 ,

additional information group notes consolidated financial statements consolidated financial statements Statement of comprehensive income consolidated Financial statements

Consolidated Statement of Comprehensive Income Consolidated Statement of Income

Continuing Discontinued Group Continuing Discontinued Group Note business business 1.1. – 31.12. business business 1.1. – 31.12. in TEUR No. divisions division 2010 divisions division 2009 Sales 1 478,750 31,897 510,647 441,338 32,271 473,609 Cost of sales 2 328,569 24,833 353,402 320,078 24,844 344,922 Gross profit 150,181 7,064 157,245 121,260 7,427 128,687

Research and development expenses 3 28,088 1,946 30,034 30,811 1,791 32,602 Selling expenses 4 53,746 665 54,411 50,420 901 51,321 General administrative expenses 5 36,494 1,561 38,055 34,789 1,672 36,461 Other operating income 6 22,524 25,230 47,754 22,796 261 23,057 Other operating expenses 7 25,347 742 26,089 49,781 1,231 51,012 2) EBIT 29,030 27,380 1) 56,410 – 21,745 2,093 – 19,652

Result from investments in associates and joint ventures 8 – 1,523 0 – 1,523 – 1,799 0 – 1,799 Result from other investments 8 – 446 0 – 446 – 2,494 0 – 2,494 Interest income 9 1,701 65 1,766 2,718 14 2,732 Interest expenses 9 13,713 19 13,732 13,078 24 13,102 Financial result – 13,981 46 – 13,935 – 14,653 – 10 – 14,663 Earnings before tax 15,049 27,426 42,475 – 36,398 2,083 – 34,315

Income taxes 10 1,312 0 1,312 216 0 216 Deferred taxes 10 4,720 0 4,720 – 979 303 – 676 Earnings after tax 9,017 27,426 36,443 – 35,635 1,780 – 33,855

Minority interest share of profit / loss 11 – 139 0 – 139 4,072 0 4,072 Net profit 9,156 27,426 36,582 – 39,707 1,780 – 37,927

Earnings per share in euros 12 0.16 0.49 0.65 – 0.76 0.03 – 0.73 Earnings per share (diluted) in euros 0.16 0.49 0.65 – 0.76 0.03 – 0.73

Consolidated Statement of Recognized Income and Expense

Earnings after tax 36,443 – 33,855 Difference arising on foreign currency translation 1,776 – 508 Financial assets available for sale 2,206 94 Cash flow hedge – 5,159 – 2,990 Deferred taxes 1,021 847 Total income and expense recognized in shareholders’ equity – 156 – 2,557 of which attributable to: Minority interests 0 – 4 Shareholders – 156 – 2,553

1) operative EBIT of discontinued bus. div. 2.879 TEUR 2) of which 27.427 TEUR expenses for reorganization and restructuring (2010: 2,267 TEUR)

116 JENOPTIK 2010 INFORMATION for the shareholders Group management report Balance sheet consolidated financial statements Notes to the consolidated financial statements additional information

Consolidated Balance Sheet

Assets in TEUR Note No. 31.12.2010 31.12.2009 Change Non-current assets 310,665 336,874 – 26,209 Intangible assets 13 72,380 77,949 – 5,569 Tangible assets 14 139,405 152,143 – 12,738 Investment properties 15 22,080 24,450 – 2,370 Shares in associates and joint ventures 17 246 261 – 15 Financial assets 18 16,579 18,938 – 2,359 Other non-current assets 19 9,080 11,037 – 1,957 Deferred tax assets 20 50,895 52,096 – 1,201 Current assets 318,190 270,216 47,974 Inventories 21 148,797 154,665 – 5,868 Current accounts receivable and other assets 22 103,308 103,240 68 Securities held as current investments 23 750 1,110 – 360 Cash and cash equivalents 24 65,335 11,201 54,134 Total assets 628,855 607,090 21,765

Shareholders‘ equity and liabilities in TEUR Note No. 31.12.2010 31.12.2009 Change Shareholders’ equity 25 282,487 239,989 42,498 Subscribed capital 148,819 135,290 13,529 Capital reserve 194,286 186,137 8,149 Other reserves – 60,936 – 81,895 20,959 Minority interests 26 318 457 – 139 Non-current liabilities 165,315 205,760 – 40,445

Pension provisions 27 6,443 6,417 26 statements financial consolidated Other non-current provisions 29 17,631 18,544 – 913 Non-current financial liabilities 31 125,856 158,218 – 32,362

Other non-current liabilities 32 11,681 20,116 – 8,435 es ot

Deferred tax liabilities 20 3,704 2,465 1,239 N

Current liabilities 181,053 161,341 19,712 up ro Tax provisions 28 2,361 2,587 – 226 G Other current provisions 29 61,895 40,592 21,303 Current financial liabilities 31 19,486 13,532 5,954 Other current liabilities 33 97,311 104,630 – 7,319 Total shareholders‘ equity and liabilities 628,855 607,090 21,765 additional information

JENOPTIK 2010 117 consolidated financial statements Statement of movements in shareholders’ equity

Consolidated Statement of Movements in Shareholders‘ Equity

Cumulative Subscribed Capital Cumulated Financial assets Cash flow currency Minority in TEUR capital reserve profit available for sale hedge differences interests Total Balance as at 1.1.2009 135,290 186,137 – 53,776 – 1,888 6,552 – 1,395 21,917 292,837

Valuation of financial instruments 98 – 2,143 – 4 – 2,049 Currency differences 84 – 592 – 508 Earnings after tax – 37,927 4,072 – 33,855 Dividends paid – 4,131 – 4,131 Other changes 9,092 – 21,397 – 12,305

Balance as at 31.12.2009 135,290 186,137 – 82,527 – 1,790 4,409 – 1,987 457 239,989

Balance as at 1.1.2010 135,290 186,137 – 82,527 – 1,790 4,409 – 1,987 457 239,989

Valuation of financial instruments 2,206 – 4,138 – 1,932 Currency differences – 433 2,209 1,776 Earnings after tax 13,529 8,149 21,678 Dividends paid 36,582 – 139 36,443 Other changes – 15,467 – 15,467

Balance as at 31.12.2010 148,819 194,286 – 61,845 416 271 222 318 282,487

118 JENOPTIK 2010 INFORMATION for the shareholders Group management report Statement of movements in shareholders’ equity consolidated financial statements Notes to the consolidated financial statements additional information

Balance as at 31.12.2009 135,290 186,137 – 82,527 – 1,790 4,409 – 1,987 457 239,989

Balance as at 1.1.2010 135,290 186,137 – 82,527 – 1,790 4,409 – 1,987 457 239,989

Balance as at 31.12.2010 148,819 194,286 – 61,845 416 271 222 318 282,487 consolidated financial statements financial consolidated es ot N up ro G additional information

JENOPTIK 2010 119 consolidated financial statements Statement of cash flows

Consolidated Statement of Cash Flows

1.1. – 31.12. 1.1. – 31.12. in TEUR 2010 2009 Earnings before tax 42,475 – 34,314 Interest 11,966 10,370 Depreciation / write-up 26,832 29,402 Impairment 6,696 16,631 Loss / profit on disposal of fixed assets – 29,407 132 Other non-cash expenses / income 1,785 1,947 Operating profit / loss before working capital changes 60,347 24,168

Increase / decrease in provisions – 1,960 3,399 Increase / decrease in working capital – 4,967 34,018 Increase / decrease in other assets and liabilities – 8,448 – 7,744 Cash flow from / used in operating activities before income taxes 44,972 53,841

Income taxes paid – 1,231 – 554 Cash flow from / used in operating activities 43,741 53,287

Receipts from disposal of intangible assets 61 135 Payments for investments in intangible assets – 2,075 – 3,760 Receipts from disposal of tangible assets 3,143 1,139 Payments for investments in tangible assets – 13,190 – 10,307 Receipts from disposal of financial assets 8,639 3,022 Payments for investments in financial assets – 2,884 – 4,347 Receipts from acquisition of consolidated companies 38,849 – 795 Payments for acquisition of consolidated companies – 4,000 – 336 Interest received 1,766 2,734 Cash flow from / used in investing activities 30,309 – 12,515

Receipts from allocations to equity 21,678 0 Dividend payments to minority shareholders 0 – 4,131 Receipts from issue of bonds and loans 24,111 84,720 Repayments of bonds and loans – 49,583 – 112,026 Repayments for finance leases – 1,218 – 770 Change in group financing – 4,292 798 Interest paid – 11,104 – 10,557 Cash flow from / used in financing activities – 20,408 – 41,966

Change in cash and cash equivalents 53,642 – 1,194 Foreign currency translation changes in cash and cash equivalents 492 – 128 Cash and cash equivalents at the beginning of the period 11,201 12,523 Cash and cash equivalents at the end of the period 65,335 11,201

120 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Details of the Group structure Notes to the consolidated financial statements additional information

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR 2010

Details of the Group structure as liabilities at the time of acquisition shall, in future, be recognised as profits or losses.A cquisition-related costs are disclosed Parent company as expenses when they are incurred. The revised standards shall The parent company is JENOPTIK AG, Jena, entered in the Jena apply to financial years beginning on or after July 1, 2009. The commercial register in department B under number 200146. first-time adoption of this change has no material impact on JENOPTIK AG is listed on the German stock exchange (Deutsche the consolidated financial statements ofJ ENOPTIK AG. Börse) in Frankfurt and included in the TecDax. IAS 39 “Financial Instruments: Recognition and Measure- Accounting policies ment”. In July 2008 the IASB approved the amendment of IAS The consolidated financial statements ofJ ENOPTIK AG for 2010 39. The amendments clarify how, when accounting for hedg- were prepared in accordance with International Financial ing transactions, to treat the inflation component of financial Reporting Standards (IFRS) and the interpretations of the Inter- instruments and option contracts which are used as hedging national Financial Reporting Interpretations Committee (IFRIC) instruments. The revised standard shall apply to financial years valid at the balance sheet date as they have to be applied in beginning on or after July 1, 2009. The first-time adoption of the European Union. The following IFRS are applied for the first this change has no material impact on the consolidated finan- time in the consolidated financial statements: cial statements of JENOPTIK AG.

IAS 27 “Consolidated and Separate Financial Statements” and IFRS 1 “First-time Adoption of International Financial Report- IFRS 3 “Business Combinations”. In January 2008 the IASB ing Standards”. In November 2008 the IASB published a new approved the amendment of IAS 27 “Consolidated and Sepa- version of IFRS 1. In the amended version the standard was rate Financial Statements“and of IFRS 3 “Business Combina- basically restructured without changing its content. Essentially tions”. The principal changes to IAS 27 include accounting for the rules on exemption of other standards have been trans- transactions whereby the entity continues to maintain control ferred from the main section to various appendices. as well as for transactions which do not lead to a loss of con- financial statements consolidated trol. These shall be treated as equity transactions with no Furthermore, the IASB announced a further amendment to impact on income. Remaining interests shall be measured at IFRS 1 in July 2009. Through these amendments exemption

fair value at the date when control is lost. Thus, where there rules are taken up for companies in the oil and gas industries es ot are minority interests negative balances may be disclosed. This with regard to the fully retrospective application of the IFRS to N means that losses will be allocated in the future, without limita- the related oil and gas assets. At the same time, companies tion, according to interests held. Major changes to IFRS 3 are with existing leasing contracts are exempted from the new Group to the measurement of minority interests, recording of step evaluation of contracts in accordance with IFRIC 4 “Determin- acquisitions and the treatment of conditional purchase price ing whether an Arrangement contains a Lease”. This applies to elements and acquisition-related costs. Minority interests can the extent that this evaluation was made at an earlier point in either be measured at fair value (full goodwill method) or at the time according to comparable national accounting regulations. proportional fair value of the identifiable net assets. For a business combination achieved in stages re-measurement should The revised standard shall apply to financial years beginning on be at fair value of the interests held at the date of transfer of or after January 1, 2010. Based on the fact that the Jenoptik control and any gains and losses recognised. Any adjustment to Group is not a first-time user ofIFRS as defined inIFRS 1, the conditional purchase price components which were disclosed amendments in IFRS 1 have no effect on the consolidated additional information financial statements ofJ ENOPTIK AG.

JENOPTIK 2010 121 Notes to the consolidated financial statements Details of the Group structure

IFRS 2 “Share-based Payment”. In June 2009 the IASB pub- IFRIC 17 “Distributions of Non-Cash Assets to Owners”. In lished an amendment to IFRS 2. The amendment clarifies the November 2008 the Interpretation IFRIC 17 “Distributions of accounting method for the provision of goods and services by Non-Cash Assets to Owners” was issued. IFRIC 17 clarifies and employees or suppliers for which another company within the explains how distributions of non-cash assets to owners should group has a settlement obligation. The revised standard shall be accounted for. Under the same interpretation the amend- apply to financial years beginning on or after January 1, 2010. ments in IFRS 5 “Non-current Assets Held for Sale and Discon- The first-time adoption of the new version ofIFRS 2 has no tinued Operations” and in IAS 10 “Events After the Reporting effect on the consolidated financial statements ofJ EOPTIK AG. Period” resulting from IFRIC 17 were also adopted. The Inter- pretation shall be applied for financial years beginning on or IFRIC 15 “Agreements for the Construction of Real Estate”. after November 1, 2009. The first-time adoption of this change In July 2008 the interpretation IFRIC 15 “Agreements for the has no material effect on the consolidated financial statements Construction of Real Estate” was issued. IFRIC 15 clarifies when of JENOPTIK AG. agreements for the construction of real estate fall under the rules of IAS 11 “Construction Contracts” or under those of IFRIC 18 “Transfers of Assets from Customers”. The Interpreta- IAS 18 “Revenue”. Additionally, IFRIC 15 includes rules deter- tion IFRIC 18 “Transfers of Assets from Customers” was issued mining when revenue should be recognised for agreements for in January 2009. IFRIC 18 clarifies and explains how to account the construction of real estate falling under the provisions of for the transfer of property, plant or equipment or receipt of IAS 18. The Interpretation shall be applied for financial years funds for the construction or acquisition of property, plant and beginning on or after January 1, 2010. The first-time adoption equipment from a customer. Under the same pronouncement of this change has no material effect on the consolidated finan- changes resulting from IFRIC 18 were adopted in IFRS 1. The cial statements of JENOPTIK AG. Interpretation shall be applied for financial years beginning on or after November 1, 2009. The first-time adoption of this IFRIC 16 “Hedges of a Net Investment in a Foreign Opera- change has no material effect on the consolidated financial tion”. In July 2008 the interpretation IFRIC 16 “Hedges of a Net statements of JENOPTIK AG. Investment in a Foreign Operation” was issued. IFRIC 16 clarifies what should be regarded as a risk in hedging the net The following standards adopted by the European Union have investment in a foreign operation and where, within the Group not been applied early: the hedging instrument for reducing the risk may be held. The Interpretation shall be applied for financial years beginning on IAS 24 “Related Party Disclosures“. In November 2009 the or after July 1, 2009. The first-time adoption of this change has IASB approved the amendment of IAS 24. The amendment pro- no material effect on the consolidated financial statements of vides a partial exemption from the disclosure requirements for JENOPTIK AG. government-related entities. Furthermore, the amendment clarifies the definition of a related party. The revised standard is effective for financial years beginning on or after January 1, 2011 and is not expected to have any effect on the accounting and measurement of the Group.

122 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Details of the Group structure Notes to the consolidated financial statements additional information

IFRS 32 (2009) “Financial Instruments: Presentation“. The IASB are part of the consideration paid for the financial liability and issued an amendment to IAS 32 “Financial Instruments: Presen- are to be measured at fair value. A resulting difference between tation” in October 2009 . According to this subscription rights, the carrying value of the financial liability being extinguished options and option certificates for the purchase of equity and the first-time measurement of the issued equity instrument instruments which are denominated in a currency other than shall be recorded to income. The Interpretation shall be applied the functional currency of the issuer and are issued to existing for financial years beginning on or after July 1, 2010. According shareholders of the entity, shall be classified as equity by the to current assessment, the first-time adoption ofIFRIC 19 will issuer. This applies to the extent the subscription rights are have no material effect on the consolidated financial state- issued at a fixed currency amount.T he revised standard shall ments of JENOPTIK AG. apply to financial years beginning on or after February 1, 2010. According to the current evaluation the first-time adoption of The financial eportingr for the fiscal year 2010 presents a true the revised IAS 32 will not have any effects on the consolidated and fair view of the net assets, financial position and results of financial statements of JENOPTIK AG. operations of the Jenoptik Group.

IFRS 1 “First-time Adoption of International Financial Report- The consolidated financial statements are prepared in Euro. ing Standards” and IFRS 7 “Financial Instruments: Disclo- Unless noted elsewhere all amounts are in thousands of Euro sures”. In January 2010 the IASB announced an amendment to (TEUR). The statement of comprehensive income is prepared on IFRS 1 and to IFRS 7. According to this first-time users are the cost of sales basis. offered an exemption to the provision of comparative figures for the measurement at fair value and for liquidity risk. IFRS 7 The fiscal year of JENOPTIK AG and its subsidiaries included in intends this exemption option for comparative periods ending the consolidated financial statements is the calendar year with before December 31, 2009. The revised standards shall apply the exception of 1 associate and / or joint venture. In deviation to financial years beginning on or after July 1, 2010. Based on to their fiscal years ending on June 30, these companies have the fact that the Jenoptik Group is not a first-time user ofIFRS each prepared interim financial statements for the twelve financial statements consolidated as defined inIFRS 1, the amendments in IFRS 1 and in IFRS 7 months ended December 31 for consolidation purposes. will have no effect on the consolidated financial statements of

JENOPTIK AG. In order to improve clarity of presentation individual items are es ot

summarized in the statement of comprehensive income and N IFRIC 19 “Extinguishing Financial Liabilities with Equity Instru- balance sheet. The analysis of these items is disclosed in the ments“. The IASB published Interpretation IFRIC 19 in Novem- Notes. Group ber 2009. This outlines the requirements of the IFRS for the accounting treatment if an entity settles a financial liability partially or in full by issuing shares or other equity instruments. According to this, the equity instruments issued for settlement additional information

JENOPTIK 2010 123 Notes to the consolidated financial statements Details of the Group structure

Estimates The consolidated financial statements ofJ ENOPTIK AG include The preparation of the consolidated financial statements in 23 (2009 28) fully-consolidated subsidiaries. Of these 15 (2009 compliance with IFRS requires assumptions to be made for cer- 18) are domestic and 8 (2009 10) are foreign. 34 subsidiaries, tain items which may have an effect on the amounts in the bal- of which 19 are non-operating companies, with no material ance sheet or statement of comprehensive income of the influence on the net assets, financial situation and results, are Group and on the disclosure of contingent assets and liabilities. not consolidated. Their operating results amount to 0.5 percent All assumptions and estimates are made to the best of our of the Group operating result. In the current fiscal year 1 asso- knowledge and belief, in order to present a true and fair view ciated entity was deconsolidated (2009 1) and is no longer of the net assets, financial position and results of operations of included in the consolidated financial statements.C ompanies the Group. included in the consolidation of the Jenoptik Group include 2 (2009 2) joint ventures accounted for at equity or proportion- The underlying assumptions and estimates are reviewed on an ally. ongoing basis. As part of this the preparer of the consolidated financial statements has certain discretionary scope. This relates The joint venture HILLOS GmbH, Jena is included in the consoli- predominantly to the following areas: dated financial statements proportionally at a share of 50 per- • the evaluation of impairment of goodwill, cent in accordance with IAS 31. The joint venture JT Optical • the measurement of intangible assets, tangible assets and Engine GmbH + Co. KG is measured at equity. Thereby, the investment properties, acquisition costs are increased or decreased annually by the • the recognition and measurement of provisions for pensions appropriate change in equity relevant to Jenoptik. and similar obligations, • the recognition and measurement of other provisions and All other investments are accounted for at fair value in accor- • the utilization of future tax relief. dance with IAS 39. If no reliable fair value can be determined then measurement is at acquisition cost. Companies included in consolidation All material entities in which JENOPTIK AG exercises indirect or In June 2010 the minority interest in caverion GmbH, Stuttgart direct control (“control concept”) are included in the consoli- of 15.1 percent was sold to the Finnish YIT Group. dated financial statements. Control, as defined in IAS 27 “Con- solidated and Separate Financial Statements”, exists where the Compared to the prior year the companies consolidated possibility exists to govern the financial and operating policies changed as follows: of an entity so as to obtain benefits from its activities. Inclusion in the consolidated financial statements is from the point at In the fiscal year 2010 the Space Technology business unit was which control over the company is possible in accordance with discontinued. In this connection Jena-Optronik GmbH was the “control concept”. It ends when this is no longer possible. deconsolidated (see section Discontinued business division).

124 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Details of the Group structure Notes to the consolidated financial statements additional information

The Jenoptik Group transferred certain parts of its property Those companies which have taken advantage of the exemp- to limited partnerships as part of so-called sale and leaseback tion provisions of § 264 (3) or § 264b HGB are disclosed transactions. The property funds SAALEAUE Immobilien Ver within the obligatory disclosures and supplementary informa- waltungsgesellschaft mbH & Co. Vermietungs KG, Jena (SAALE- tion under HGB. AUE) and LEUTRA SAALE Gewerbegrundstücksgesellschaft mbH & Co. KG, Grünwald, (LEUTRA SAALE) are consolidated in Discontinued business division the IFRS consolidated financial statements underIAS 27 in con- After approval by the Antitrust Authorities at the end of nection with SIC-12 “Consolidation-Special Purpose Entities“. November the sale of Jena-Optronik GmbH to Astrium GmbH was concluded on December 3, 2010. The deconsolidation of The list of JENOPTIK AG investments is held by the Commercial Jena-Optronik GmbH was performed in the Jenoptik Group Register at the Jena District Court (HRB 200146). The material as at November 30, 2010. Unless otherwise disclosed, Jena- subsidiaries included in the consolidated financial statements Optronik is included proportionally in the following notes up to are attached as an appendix to the notes to the consolidated the deconsolidation date. financial statements. The following changes in companies consolidated resulted As a result of the proportional consolidation of joint ventures from the deconsolidations: the following amounts are included in the consolidated finan- Disposals cial statements: in TEUR 2010 Non-current assets 2,881 Current assets 28,169 in TEUR 2010 2009 Non-current liabilities 2,099 Non-current assets 2,232 2,225 Current liabilities 18,413 Current assets 7,486 5,436 Non-current liabilities 33 21

Current liabilities 4,651 2,853 The operating result of the company amounted to TEUR 2,879 financial statements consolidated Income 13,871 9,438 for January to November 2010. Through the sale a decon Expenses 13,624 9,418 solidation gain of TEUR 24,501 was generated in the Jenoptik

Group. The deconsolidation result also includes allowances for es ot

The company accounted for at equity in the consolidated finan- research and development topics and tangible assets as well as N cial statements shows the following proportional values as at provisions and costs of the sale which arose in connection with

December 31, 2010: the discontinuation of the business division. Group

in TEUR 2010 2009 In connection with the sale of Jena-Optronik GmbH an overall Non-current assets 358 532 tax expense of 4.6 million euros arose which mainly relates to Current assets 690 269 deferred taxes. Dependent on the tax subject characteristic this Non-current liabilities 0 0 has to be allocated to the head of the tax group, JENOPTIK AG, Current liabilities 308 454 and thus to the continuing business divisions. Income 2,306 724 Expenses 1,827 2,377 additional information

JENOPTIK 2010 125 Notes to the consolidated financial statements Details of the Group structure

Company acquisitions The determination of goodwill as part of the first at equity In the current fiscal year there were no material company valuation is carried out in the same way as the initial consolida- acquisitions. tion of subsidiaries as part of the full consolidation.

Consolidation methods Receivables and payables, as well as expenditure and income The assets and liabilities of the domestic and foreign companies between consolidated companies, are eliminated. Intra-group either fully or partially included in the consolidated financial trade transactions are performed based on market prices and statements are subject to the uniform accounting policies appli- on transfer prices that are determined based on the “dealing cable to the Jenoptik Group. For the companies measured at arm’s length” principle. Profits on intra-group transactions using the equity method the same accounting policies are included in inventories have been eliminated. Consolidation applied for determining proportional equity. entries which have an effect on income are subject to deferred taxation, whereby deferred tax assets and deferred tax liabilities At the time of acquisition capital consolidation is performed are offset where the payment period and taxation authority by offsetting the investment carrying values with the propor- are the same. tional, newly valued equity of the subsidiaries. The assets and liabilities of the subsidiaries are accounted for at fair values, The consolidation methods applied have not changed in com- furthermore contingent liabilities are provided for. A positive parison to the prior year. difference arising does not directly represent goodwill to be accounted for. The difference is first analyzed into identifiable Foreign currency translation intangible assets. Any remaining amount represents the good- Translation of financial statements of companies included in will. the consolidation, prepared in foreign currency, is performed based on the concept of functional currency in accordance The silent reserves and charges realized are accounted for in with IAS 21 “The Effects of Changes in Foreign Exchange Rates” the subsequent consolidation in accordance with the using the modified balance sheet date rate method. Since our corresponding assets and liabilities, depreciated and / or released. subsidiaries conduct their operations financially, commercially, Goodwill capitalized is not amortized but subject to an annual and organizationally independently the functional currency is impairment test in accordance with IFRS 3. Negative goodwill is identical with the relevant country currency of the company. charged directly to other operating income. Those write-ups or write-downs on shares in Group companies accounted for in Assets and liabilities are consequently translated at the balance single entity financial statements are reversed again in the con- sheet date rate and expenses and income, for practical reasons, solidated financial statements. at the average rate for the year. The difference arising on foreign currency translation is offset against equity as a special currency translation reserve with no effect on income.

126 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Accounting policies Notes to the consolidated financial statements additional information

Goodwill arising from the capital consolidation of foreign Accounting policies companies is translated at the rates prevailing at the time of purchase. Accounting policies are applied uniformly and consistently within the Jenoptik Group. If Group companies are no longer included in the consolidation then the relevant foreign exchange difference is released to the Financial statements prepared in accordance with country- income statement. specific requirements are adjusted to conform to the uniform Group accounting principles, where they do not comply with In the separate financial statements of consolidated companies IFRS and the measurement differences are material. prepared in local currency receivables and liabilities are translated at the balance sheet date rate in accordance with IAS 21. Goodwill Foreign exchange differences are recorded impacting income For all business combinations prior to the conversion to IFRS in other operating expenses and other operating income. In the the exemption provisions of IFRS 1 have been applied. fiscal year 2010 foreign exchange gains amounted to TEUR 8,079 (2009 TEUR 7,716) and foreign currency losses The rules of IFRS 3 are applied to all business combinations amounted to TEUR 6,820 (2009 TEUR 7,994). after the date of transition. The Jenoptik Group does not use the option under IFRS 3 (revised) to apply the full goodwill Accounting in accordance with the rules of IAS 29 “Financial method and only the goodwill allocated to the majority share- Reporting in Hyperinflationary Economies” is not necessary holding is increased. since there are no material subsidiaries located in highly infla- tionary countries within the Jenoptik Group. Goodwill in accordance with IFRS 3 represents the positive difference between the acquisition costs for a business combina- The rates used for translation can be seen from the following tion and the newly valued assets and liabilities acquired, includ- table: ing certain contingent liabilities, which remains after the pur- financial statements consolidated Average annual rate Balance sheet date rate chase price has been allocated and, thus, the intangible assets 1EUR = 2010 2009 31.12.2010 31.12.2009 identified.I n terms of their values, the assets and liabilities USAUSD 1.3170 1.3826 1.3362 1.4406

identified as part of this purchase price allocation are not mea- es

Switzerland CHF 1.3572 1.4997 1.2504 1.4836 ot

sured at their carrying values to date but at their fair values. N Group additional information

JENOPTIK 2010 127 Notes to the consolidated financial statements Accounting policies

Goodwill is recognised as an asset and tested at least annually Development expenses are capitalized if a newly developed at a specific time for impairment or whenever there is an indi- product or process can be clearly separately identified, is tech- cation of impairment in the cash-generating unit. Impairment nically feasible and is intended either for internal use or sale. losses are recorded immediately in the statement of compre- Furthermore, in order to capitalize the development expenses it hensive income as expenses and are not reversed in subsequent should be reasonably certain that these are covered by future periods. financial inflows.C apitalized development expenses are amor- tised over the expected sales period of the products. Amortiza- Negative goodwill on capital consolidation is credited immedi- tion is included in the research and development expenses. ately to other operating income in the statement of income in Research costs shall be recognized as operating expenses in accordance with IFRS 3. accordance with IAS 38. Acquisition or production costs include all costs directly attributable to the development process and Intangible assets appropriate portions of the general overheads related to devel- Intangible assets acquired for a consideration, mainly software, opment. Where the recognition criteria as an asset are not met patents, customer relationships, are capitalized at acquisition the costs are treated as an expense in the year they are costs. Intangible assets with a finite useful life are amortized incurred. straight-line over their useful economic lives. Useful lives are between three and ten years. The Group reviews its intangible Tangible assets assets with finite useful lives as to whether they are impaired Tangible assets are carried at historical acquisition or produc- (see section “Impairment of tangible and intangible assets”). tion cost less accumulated straight-line depreciation. The depreciation method reflects the expected course of future For intangible assets with an infinite useful life an impairment economic use. Where necessary amortized acquisition or pro- test is performed at least annually and their value adjusted to duction costs are reduced by impairment losses. Government reflect future expectations as appropriate. grants are deducted from acquisition or production costs in accordance with IAS 20 “Accounting for Government Grants” Internally generated intangible assets are capitalized if the (see section “Government Grants”). Production costs are based recognition criteria of IAS 38 “Intangible Assets” are met. on directly attributable costs and proportional material and pro- Manufacturing costs comprise all directly attributable costs. duction overheads including depreciation. In accordance with IAS 23 borrowing costs which are incurred on acquisition or manufacture of a qualified asset are capitalized at acquisition and manufacturing costs.

128 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Accounting policies Notes to the consolidated financial statements additional information

There were no revaluations of assets in accordance with the An impairment test is performed on individual assets or on a option in IAS 16 “Property, Plant and Equipment”. cash-generating unit (CGU). A CGU represents as a rule the organizational structure. Where there are changes to organiza- Tangible asset repair costs are always expensed. Subsequent tional structure within the Group, e. g. through mergers or purchase costs are capitalized for components of tangible spin-offs, the CGU is newly defined appropriately. assets which are renewed at regular intervals and fulfill the recognition criteria of IAS 16. If there are indications for impairment, the recoverable amount of the asset is calculated in order to determine the amount of Depreciation is mainly based on the following useful lives: relevant impairment loss.

Useful life The recoverable amount is the higher of an asset’s fair value Buildings 25 – 40 years less costs to sell and its value in use. The fair value less costs to Technical equipment and machines 4 – 20 years sell is the amount obtainable from the sale of an asset in an Other equipment, factory and office equipment 3– 10 years arm’s length transaction between knowledgeable and willing parties. If tangible assets are no longer used, sold or abandoned the profit or loss from the difference between the sales proceeds Value in use is determined on the basis of the present value of and the net book value is recorded in other operating income the future cash flows expected. This is based on a market-rele- or other operating expenses. vant interest rate before tax which reflects the risks of the use of the assets which have not yet been accounted for in the Minor-value assets are fully depreciated in their year of acquisition. estimated future cash flows.I f the recoverable amount of an asset is estimated as lower than its carrying value it is then writ- Impairment of tangible and intangible assets ten down to the recoverable amount. Impairment losses are

For tangible and intangible assets belonging to the Jenoptik recorded immediately as expenses. financial statements consolidated Group which have finite useful lives, an assessment is made at each year end whether the appropriate assets show any indica-

tions of impairment in accordance with IAS 36 “Impairment of es ot

Assets”. N Group additional information

JENOPTIK 2010 129 Notes to the consolidated financial statements Accounting policies

Where there is a reversal of impairment in a subsequent period If the Group is the lessor the net investment in the lease is the carrying value of the asset is adjusted to reflect the ecover-r capitalized as a receivable. Finance income is recognized in able amount determined. The maximum limit for reversal of an the appropriate period in the income statement ensuring a impairment loss is determined as the carrying value of the constant periodic rate of return on the net investment. acquisition or production costs which would have been determined had no impairment loss been recognized in previous Operating leasing periods. The impairment loss reversal is recorded immediately in Rental income from operating lease agreements is written off the statement of income. straight-line to the income statement in accordance with the term of the appropriate lease. Any discounts received and Leasing receivable as incentives to enter into a leasing contract are also Leased tangible assets fulfill the conditions for finance leasing apportioned on a straight-line basis over the term of the lease. in accordance with IAS 17 “Leases” if all the significant risks and rewards related to ownership are transferred to the rele- Investment properties vant Group company. All other leasing contracts are classified Investment properties comprise land and buildings held to earn as operating leases. rentals or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administra- Finance leasing tive purposes or for sale in the ordinary course of business. As lessee under finance leasing theG roup capitalizes the relevant assets at the inception of the lease at the lower of the In accordance with IAS 40 “Investment Properties” these are fair value of the assets and the present value of the minimum recognized at amortized acquisition or production costs. The lease payments. These assets are depreciated straight-line for fair value of these properties is additionally disclosed in the the shorter of their useful economic lives or term of the leasing notes to the financial statements. It is determined using the dis- agreement if the purchase of the leased asset is not probable counted cash flow model.I n exceptional cases the fair value at the end of the leasing period. The payment liabilities from was supported by an external expert valuation. future leasing installments are discounted and accordingly recognized as liabilities. Straight-line depreciation is based on useful economic lives of 25 to 40 years.

130 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Accounting policies Notes to the consolidated financial statements additional information

Impairment losses on investment property are accounted for in The amortized cost of a financial asset or liability is the amount accordance with IAS 36 if the value in use or fair value less dis- at which the financial asset or financial liability is initiallyecog- r posal costs for the relevant asset have fallen below its carrying nized: value. Where the reasons for accounting for an impairment loss • less potential repayments of capital and in previous years are no longer relevant then an appropriate • less any impairment losses or provisions for non-payment as impairment loss reversal is accounted for. well as • plus / less accumulated allocation of any difference between Financial instruments the original amount and the repayment amount (for example Financial instruments are contracts that give rise to both a premium) when finally due.T he premium is apportioned financial asset of one entity and a financial liability or equity using the effective interest method over the term of the instrument of another entity. In accordance with IAS 32 these financial asset or financial liability. include, on the one hand, original financial instruments such as trade accounts receivable and trade accounts payable or finan- For current receivables and current payables the amortized cial receivables and financial payables.O n the other hand, they costs generally represent the nominal value or repayment value. also include derivative financial instruments which are used to hedge risks from exchange rate and interest rate fluctuations. The fair value is generally the market or stock exchange value. If there is no active market the fair value is determined using Financial assets and financial liabilities are recognized in the financial mathematical methods, e. g. by discounting estimated Group balance sheet from the point at which the Group future cash flows at the market interest rate or by applying rec- becomes a contractual party to the financial instrument. Finan- ognized option price models, and checked by confirmation cial assets are capitalized on their settlement date. from the banks who deal with the transactions.

Financial instruments are measured depending on their classification in the categories “Receivables and loans” (at amortized financial statements consolidated cost) and “Available-for-sale” (at fair value). es ot N Group additional information

JENOPTIK 2010 131 Notes to the consolidated financial statements Accounting policies

Primary financial instruments Securities Securities belong to the category “financial assets available for Shares in companies sale” and are measured at fair value. The measurement is Initial recognition is at acquisition cost including transaction accounted for neutrally, also under consideration of deferred costs. taxes, within equity until disposal. On disposal of the securities, or where permanent impairment occurs, the cumulative gains For the Jenoptik Group all shares in subsidiaries and invest- and losses accounted for until now directly in equity are ments in quoted stock corporation which are not fully consoli- recorded in the statement of comprehensive income for the dated, partially consolidated or accounted for at equity are current period. Initial valuation is at cost on the settlement date included in the Group financial statements, classified as “avail- and corresponds with fair value. able for sale” and valued in subsequent periods at fair value. Changes in value of “financial assets available for sale” are Trade accounts receivable recorded directly in equity. Where impairment is of a perma- Trade receivables do not attract interest due to their short-term nent nature this is recorded in income. nature and are measured at nominal value less allowances estimated for bad debts. Shares in unquoted subsidiaries and investments also qualify as “financial assets available for sale”. However, they are princi- Other receivables and assets pally stated at acquisition cost since there is no active market Other receivables and assets are measured at amortized cost. for these companies and their fair values cannot be reliably All recognizable bad debt risks are accounted for in the form of determined with a reasonable amount of effort. Where there write-downs. are indications of lower fair values these are applied. Non-current, non-interest bearing or low-interest bearing mate- Loans rial receivables are discounted. Loans relate to the amounts lent by the Jenoptik Group which, in accordance with IAS 39, have to be valued at amortized Cash and cash equivalents cost. Cash and cash equivalents are cash balances, cheques and immediately accessible bank balances at financial institutions, Non-current non-interest bearing and low-interest bearing the original maturity of which is up to three months, and which loans are accounted for at present value. Where there are are measured at nominal value. objective substantial indications of impairment then impairment losses are accounted for.

132 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Accounting policies Notes to the consolidated financial statements additional information

Restricted cash Derivative financial instruments Restricted cash is separately disclosed. Within the Jenoptik Group derivative financial instruments are used as hedges to control risks from interest and currency fluc- Financial liabilities and equity instruments tuations. They serve to reduce the volatility in results from inter- Financial liabilities are measured at amortized cost applying the est and currency risks. The fair values were determined on the effective interest method. Financial liabilities not accounted for basis of the market conditions existing at the balance sheet like this are those which have an effect on income being mea- date – interest rates, exchange rates, goods prices – and the sured at fair value. This type of financial liability does not cur- following measurement methods. rently exist. Derivative financial instruments are not used for speculative An equity instrument is a contract that represents a residual purposes. The use of derivative financial instruments is subject interest in the assets of an entity after deducting all of its liabili- to a Group guideline authorized by the Executive Board which ties. represents a written fixed guideline with regard to the treatment of derivative financial instruments.I n order to secure risks Bank liabilities from currency and interest fluctuations the Group mainly uses Bank loans attracting interest and overdrafts are accounted for cash flow hedges. at the amounts received less directly allocable issuing costs. Finance costs, including repayment or capital repayment of Cash flow hedging is described as the process of fixing future payable premiums, are accounted for in accordance with the variable cash flows. As part of cash flow hedging, the Jenoptik accruals principle applying the effective interest method and Group hedges currency risks. Currency derivatives which can increase the book value of the instrument where they are not clearly be allocated to future cash flows from foreign currency repaid at the time they arise. transaction and fulfill the conditions ofIAS 39 with regard to documentation and effectiveness, are hedged directly by banks.

Liabilities financial statements consolidated Liabilities which do not represent the primary transaction in a The objective of a fair value hedge is to neutralize the market permissible hedging transaction and are not held for trading value changes in assets and liabilities with the market value

are measured at amortized cost in the balance sheet. Differ- changes of the hedging transaction in the other direction. A es ot ences between the historical acquisition costs and the redemp- profit or loss arising from the market value changes of a hedg- N tion amount are accounted for using the effective interest ing transaction should be taken to the statement of compre- method. Liabilities from finance leasing agreements are stated hensive income immediately. With regard to the hedged risk Group at the net present value of the minimum lease payments. with effect from commencement of the hedge, the underlying transaction should also be taken to the statement of income. additional information

JENOPTIK 2010 133 Notes to the consolidated financial statements Accounting policies

Changes in the fair value of derivative financial instruments The net realizable value is the estimated selling price less the hedging a cash flow risk are documented.I f hedging relation- expected costs of completion and costs arising up to sale. ships are classified as effective the changes in fair value are directly recorded in equity. The reclassification from equity to On-account payments received the statement of comprehensive income is performed in the On-account payments received from customers are accounted period where the underlying primary transaction impacts for under liabilities unless they are for construction contracts. income. Changes in value from financial instruments classified as non-effective are recorded directly in the statement of com- Construction contracts prehensive income. Sales and profit from construction contracts are recorded according to their stage of completion in accordance with IAS The task of the central Group Treasury is also to monitor and 11 “Construction Contracts” (percentage of completion optimize interest rate fluctuation risk.I n this connection interest method). The stage of completion results from the proportion caps and interest swaps are used on an individual basis. of contract costs incurred for work performed to date until the end of the fiscal year to the estimated total contract costs (cost Inventories to cost method). Losses on construction contracts shall be fully Inventories are stated at the lower of acquisition or production recognized immediately in the fiscal year in which the losses are cost and net realizable value. identified irrespective of the stage of completion of contract activity. Production cost includes production-related full costs determined on the basis of normal utilization of capacity. In addition Construction contracts which are measured using the percent- to direct costs they include a share of material and production age of completion method are disclosed as assets or liabilities overheads as well as depreciation of assets used in production from construction contracts depending on the amount of the to the extent that these are attributable to the production pro- progress billings demanded. These are measured at production cess. In particular those costs are accounted for which are cost plus proportional profit in relation to the stage of comple- incurred under the specific production cost centers. Administra- tion reached. Where the cumulative contract result (contract tion costs are accounted for if they can be allocated to produc- costs plus contract result) is higher than the amount of prog- tion. Where amounts are lower at the balance sheet date due ress billings received, the balance for contracts in progress is to decreased prices in the sales market, these should be disclosed as an asset under receivables due from construction applied. Similar items in inventories are principally valued using contracts. If a negative balance remains after deducting the the average method. If the reasons for previously devaluing on-account payments received, then this is disclosed as a liabil- inventories no longer exist and the net realizable value thus ity under payables from long-term construction contracts. rises, the increases in value are recorded as decreases in the Expected losses on contracts are accounted for through deduc- cost of materials in the appropriate period in which the tions or provisions and are determined under consideration of increases in value take place. recognizable risks.

134 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Accounting policies Notes to the consolidated financial statements additional information

Deferred taxes The calculation is based on trend assumptions of 2.75 percent The accounting for deferred taxes is in accordance with IAS 12 (2009 2.75 percent) for salary development, of 2.0 percent “Income Taxes”. Deferred taxes are calculated based on the (2009 1.75 to 2.0 percent) for pension development and a dis- internationally common balance sheet oriented liability count rate of 4.65 percent (2009 5.15 percent). method. Deferred tax assets and deferred tax liabilities are disclosed as separate items in the balance sheet in order to The mortality probabilities are determined from the Heubeck account for the future tax effect of timing differences between tables “Richttafeln 2005 G“. Actuarial gains and losses which the measurement of assets and liabilities in the balance sheet exceed the range of 10.0 percent of the higher of the scope of and for tax purposes. the commitment and fair value of the plan assets should be allocated over the average remaining service period. The service Deferred tax assets and liabilities are accounted for at the cost is disclosed under personnel expenses, the interest portion amount of the expected tax charge or tax credit in subsequent of the addition to the provision under the financial result. fiscal years based on the tax rate valid at the point of realization. The effects of tax rate changes on deferred taxes are The option in accordance with IAS 19.93A to fully record actu- recorded in the reporting period in which the legislation for the arial gains and losses and offset them against retained earnings tax rate change is concluded. has not been utilized.

Deferred tax assets on balance sheet differences and on tax The defined contribution pension systems (e. g. direct insur- loss carried forward are only recognized if the realization of ance) offset the obligatory contributions directly as cost. Provi- these tax benefits is probable. sions for pensions are not set up for these as the Jenoptik Group is not subject to an extra obligation in addition to the Deferred tax assets and deferred tax liabilities are offset where premium payment. the tax authority and term are identical. In accordance with the rules of IAS 12 deferred tax assets and liabilities are not dis- Tax provisions financial statements consolidated counted. Tax provisions include obligations from current taxes on income. Deferred taxes are disclosed as separate items in the

Provisions for pensions and balance sheet and in the statement of comprehensive income. es ot similar obligations N Pensions and similar obligations include the pension commit- Tax provisions for trade tax and corporation tax or comparable ments of the Group from defined benefit and defined contribu- taxes on income are based on the expected taxable income of Group tion pension plans. For defined benefit pension plans pension the companies included in the consolidation less payments obligations are determined in accordance with IAS 19 made on account. Other taxes to be assessed are accounted “Employee Benefits”, applying the so-called “projected unit for accordingly. credit method”. Annual actuarial reports are obtained for this. additional information

JENOPTIK 2010 135 Notes to the consolidated financial statements Accounting policies

Other provisions and accrued expenses Share-based payments In accordance with IAS 37 “Provisions, Contingent Liabilities The long-term-incentive-components (LTI) for members of the and Contingent Assets” provisions are recognized where there Executive Board of JENOPTIK AG were accounted for as share- is a current obligation to a third-party as a result of a past event based remuneration with cash compensation. At the balance which will probably lead to an outflow of resources and the sheet date a non-current liability was set up amounting to the amount of which can be reliably estimated. This means that the fair value of the payment obligation. The share programme is probability of occurrence of a present obligation is higher than allocated based on the annual target agreement. Changes in that of its non-occurrence. Other provisions and accrued fair value are recorded in the statement of income. expenses are only recognized if there is a legal or constructive obligation to a third-party. Government grants IAS 20 differentiates between capital grants for non-current Provisions and accrued expenses which do not already lead to assets and income-related grants. an outflow of resources in the subsequent year are measured at their discounted settlement amount at the balance sheet IAS 20 basically provides for the treatment of grants to impact date where the interest effect is material. Discounting is based income in the correct period. on pre-tax interest rates which reflect the current market expectations with regard to interest effects and those risks specific to For non-current assets in the Jenoptik Group grants are the liability, and which are dependent on the appropriate term deducted from acquisition costs. By deducting grants from of the commitment. Provisions for warranties are established acquisition costs the depreciation volume is determined on the at the time of sale of the relevant goods or provision of the basis of the thus lower acquisition costs. appropriate services. The amount of the provision is based in the historic development of warranties and the observation of Contingent liabilities all future potential warranty cases weighted according to their Contingent liabilities are possible obligations that arise from probability of occurrence. past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future The settlement amount comprises expected cost increases. events not within the control of the Jenoptik Group. Further- more, present obligations can represent contingent liabilities if Provisions and other accrued expenses are not offset against the probability of an outflow of resources is not sufficient to counter claims. Provisions and accrued expenses are measured recognize a provision and / or the amount of the obligation can- at experience values from the past under consideration of the not be measured with sufficient reliability. Contingent liabilities conditions at the balance sheet date. are measured at the level of the scope of the liability at the balance sheet date. They are not recorded in the balance sheet but explained in the notes to the financial statements.

136 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Accounting policies Notes to the consolidated financial statements additional information

Statement of comprehensive income In addition to personnel and non-personnel costs selling Income from the sale of goods is recorded in the statement of expenses include mailing, advertising, sales promotion, market comprehensive income as soon as all material rewards and risks research and customer service costs. General administrative of ownership have been transferred to the purchaser, a price expenses include personnel and non-personnel costs as well as agreed or determined and it can be assumed that this will be depreciation and amortization relating to the administration paid. Sales include the consideration invoiced to customers for function. goods and services – reduced for deductions, conventional penalties and discounts. Income from release of provisions is, in accordance with IAS 8 “Accounting Policies, Changes in Accounting Estimates and Income from services is recorded depending on the stage of Errors”, offset against the expense items in which the provi- completion of the contract at the balance sheet date. The stage sions were originally set up. Thus, reversals of provisions are of completion of the contract is measured based on the ser- recognized in the relevant functional costs in which the provi- vices provided. Income is only recorded when it is sufficiently sions were also recorded. probable that the company receives the economic benefit from the contract. Otherwise, income is only recorded to the degree Other taxes are included in other operating expenses. Dividend that the costs incurred are recoverable. income is recorded at the time it legally arises.

Cost of sales includes the costs incurred in generating sales. This item also includes the cost of warranty provisions. Amorti- zation and depreciation on intangible assets and tangible assets are recognized as they arise and included in manufacturing cost, selling or administrative expenses. Research and development expenses not qualifying for capitalization as well as write- downs against development costs are also disclosed under financial statements consolidated development expenses. es ot N Group additional information

JENOPTIK 2010 137 Notes to the consolidated financial statements Historical summary of financial data

Historical summary of financial data in accord. with IFRS (1) in million EUR 2004 2005 2006 1) 2007 2008 2009 2010 Non-current assets 636.2 454.9 417.0 387.7 376.3 336.9 310.7 Intangible assets 99.1 76.7 89.5 88.3 88.9 78.0 72.4 Tangible assets 231.0 164.7 170.2 175.9 170.5 152.1 139.4 Investment properties 63.2 58.0 34.6 36.0 34.8 24.5 22.1 Financial assets 120.7 73.0 55.0 24.0 18.8 18.9 16.6 Shares in associated companies 33.5 16.7 1.4 0.8 1.3 0.3 0.2 Other non-current assets 16.9 8.8 11.2 10.8 10.6 11.0 9.1 Deferred tax assets 71.8 57.0 55.1 51.9 51.4 52.1 50.9 Current assets 918.8 279.6 456.7 309.6 312.8 270.2 318.2 Inventories 184.2 143.3 161.5 174.1 179.5 154.7 148.8 Accounts receivable and other assets 558.2 125.5 137.8 119.5 118.8 103.2 103.3 Securities held as current investments 1.4 2.0 3.6 2.2 2.0 1.1 0.8 Cash and cash equivalents 175.0 8.8 153.8 13.8 12.5 11.2 65.3 Assets held for sale 0.0 773.8 0.0 0.0 0.0 0.0 0.0 Shareholders’ equity 369.0 314.3 299.4 280.9 292.8 240.0 282.5 of which subscribed capital 135.3 135.3 135.3 135.3 135.3 135.3 148.8 Non-current liabilities 452.6 369.2 333.2 208.8 133.1 205.8 165.3 Pension provisions 56.3 6.9 6.4 6.4 6.4 6.4 6.4 Other non-current provisions 20.7 15.3 22.3 22.1 18.4 18.6 17.6 Non-current financial liabilities 339.8 324.7 281.6 161.7 92.4 158.2 125.9 Other non-current liabilities 34.0 19.2 20.0 15.2 13.0 20.1 11.7 Deferred tax liabilities 1.8 3.1 2.9 3.4 2.9 2.5 3.7 Current liabilities 733.4 193.0 241.1 207.6 263.2 161.3 181.1 Tax provisions 15.2 1.7 1.2 1.1 2.9 2.6 2.4 Other current provisions 67.8 26.0 41.1 39.9 35.8 40.6 61.9 Current financial liabilities 75.5 61.6 78.8 45.9 113.7 13.6 19.5 Other current financial liabilities 574.9 103.7 120.0 120.7 110.8 104.5 97.3 Liabilities held for sale 0.0 631.8 0.0 0.0 0.0 0.0 0.0 Total assets 1,555.0 1,508.3 873.7 697.3 689.1 607.1 628.9 Change compared to prior year Non-current assets – 18.0 %– 28.5 %– 8.3 %– 7.0 %– 2.9 %– 10.5 %– 7.8 % Current assets – 6.4 %– 69.6 % 63.4 %– 32.2 % 1.0 %– 13.6 % 17.8 % Shareholders’ equity 2.6 %– 14.8 %– 4.7 %– 6.2 % 4.2 %– 18.0 % 17.7 % Non-current liabilities – 24.9 %– 18.4 %– 9.8 %– 37.5 %– 36.3 % 54.6 %– 19.7 % Current liabilities – 7.7 %– 73.7 % 24.9 %– 13.6 % 26.8 %– 38.7 % 12.3 % Share of total assets Non-current assets (asset ratio) 40.9 % 30.2 % 47.7 % 55.6 % 54.6 % 55.5 % 49.4 % Current assets 59.1 % 18.5 % 52.3 % 44.4 % 45.4 % 44.5 % 50.6 % Shareholders’ equity (equity ratio) 23.7 % 20.8 % 34.3 % 40.3 % 42.5 % 39.5 % 44.9 % Debt capital (debt capital ratio) 76.3 % 37.3 % 65.7 % 59.7 % 57.5 % 60.5 % 55.1 % Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 per share 0.00 0.00 0.00 0.00 0.00 0.00 0.00 in % of subscribed capital 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Return on dividend based on year-end price 31.12. 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % 0.0 % Net financial liabilities 2) 238.9 375.5 203.0 191.6 191.6 159.5 79.3 in % of adjusted total assets 3) 18.7 % 26.4 % 32.4 % 32.3 % 32.7 % 30.9 % 16.2 %

1) Continuing business divisions 2) Financial liabilities less cash and securities 3) Balance sheet total less intangible assets and cash including securities held as current investment

138 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Historical summary of financial data Notes to the consolidated financial statements additional information

Historical summary of financial data in accord. with IFRS (2)

2005 1) in million EUR 2004 2005 adjusted 2006 2007 2008 2009 2010 2) Sales 2,523.0 1,914.4 410.1 485.1 521.7 548.3 473.6 510.6 Gross profit 293.0 191.7 124.8 151.3 159.9 161.9 128.7 157.2 in % of sales 11.6 % 10.0 % 30.4 % 31.2 % 30.6 % 29.5 % 27.2 % 30.8 % EBITDA 3) 128.8 43.7 57.7 69.9 79.1 67.5 23.3 88.7 in % of sales 5.1 % 2.3 % 14.1 % 14.4 % 15.2 % 12.3 % 4.9 % 17.4 % EBIT 4) 81.1 – 9.8 25.1 38.2 35.3 37.1 – 19.7 56.4 in % of sales 3.2 %– 0.5 % 6.1 % 7.9 % 6.8 % 6.8 %– 4.2 % 11.0 % Earnings before tax 37.4 – 52.5 8.1 19.1 0.7 20.2 – 34.3 42.5 in % of sales 1.5 %– 2.7 % 2.0 % 3.9 % 0.1 % 3.7 %– 7.2 % 8.3 % Earnings after tax 19.0 – 69.4 4.0 16.1 – 4.6 16.6 – 33.9 36.4 in % of sales 0.8 %– 3.6 % 1.0 % 3.3 %– 0.9 % 3.0 %– 7.2 % 7.1 % Cash flow from / used in operat. activities 5) 100.8 31.7 65.7 28.8 73.8 46.5 53.3 43.7 Free cash flow (before income taxes) 71.2 1.2 17.5 42.4 27.9 41.0 32.9

Change compared to prior year Sales 31.3 %– 24.1 % 18.3 % 7.5 % 5.1 %– 13.6 % 7.8 % Gross profit 43.5 %– 34.6 % 21.2 % 5.7 % 1.3 %– 20.5 % 22.1 % EBITDA 153.0 %– 66.1 % 21.1 % 13.2 %– 14.7 %– 65.5 % 280.7 % Result from operating activities 801.1 %– 112.1 % 52.5 %– 7.6 % 5.1 %– 153.1 % + + Earnings after tax – 141.5 %– 464.3 % 307.6 %– 128.5 % 460.9 %– 304.2 % + + Employees (average) 10,052 9,486 2,621 2,849 3,215 3,292 3,206 2,928 Personnel expenses (incl. pensions) 536.7 472.6 148.4 180.1 192.3 194.7 187.3 186.3 Personnel ratio (in % of sales) 21.3 % 24.7 % 36.2 % 37.1 % 36.9 % 35.5 % 39.5 % 36.5 % Sales per employee (in TEUR) 251.0 201.8 156.5 170.3 162.3 166.6 147.7 174.4 Cost of materials (incl. purchased services) 1,468.7 1,076.0 184.8 227.1 252.2 252.5 206.6 224.2 Materials ratio (in % company performance) 56.6 % 55.4 % 43.8 % 44.5 % 45.1 % 44.7 % 41.9 % 40.3 % Research and development expenses 31.8 34.4 27.4 33.8 39.0 34.1 32.6 30.0 in % of sales 1.3 % 1.8 % 6.7 % 7.0 % 7.5 % 6.2 % 6.9 % 5.9 % financial statements consolidated Net value added 618.4 456.6 168.1 213.3 221.2 226.7 163.8 240.7 in % of company performance 6) 23.8 % 23.5 % 39.8 % 41.8 % 39.5 % 40.1 % 33.2 % 43.2 %

of which shareholders, company share 3.1 %– 15.2 % 2.4 % 7.6 %– 2.1 % 7.3 %– 20.7 % 15.1 % es ot

Return on sales based on EBIT 3.2 %– 0.5 % 6.1 % 7.9 % 6.8 % 6.8 %– 4.2 % 11.0 % N Total turnover of assets 1.62 1.27 0.56 0.75 0.80 0.78 0.81

Total return on capital based on EBIT 5.2 %– 0.6 % 4.4 % 5.1 % 5.4 %– 3.2 % 9.0 % Group Return on shareholders’ equity before tax (at balance sheet date) 10.1 %– 16.7 % 6.4 % 0.2 % 6.9 %– 14.3 % 15.0 % Adjusted equity ratio 7) 21.1 % 16.7 % 33.5 % 32.5 % 34.8 % 31.3 % 42.8 % Non-current assets financed by shareholders’ equity 58.0 % 69.1 % 71.8 % 72.5 % 77.8 % 71.2 % 90.9 % Asset cover 8) 159.7 % 190.8 % 175.9 % 159.7 % 171.7 % 157.8 % 202.6 %

1) Continuing business divisions 2) Group including discontinued business division 3) EBIT before depreciation / write-ups on tangible and intangible assets 4) Operating income before interest and net investment result 5) Earnings after tax + changes in provisions + depreciation / write-ups, each excl. effects from first-time consolidation and deconsolidation 6) Company performance = sales plus other operating income and net investment result and income from securities 7) Shareholders´ equity less intangible assets / total assets less intangible assets, cash and cash equivalents and securities additional information 8) Shareholders´ equity / tangible assets excl. property => ratio of plant, machinery, equipment financed by shareholders‘ equity

JENOPTIK 2010 139 Notes to the consolidated financial statements Segment reporting

Segment reporting In the Metrology segment, the division Industrial Metrology is known as a manufacturer and systems provider for high-preci- The presentation of segments is in accordance with IFRS 8 sion, contact and non-contact production metrology. The Traf- “Operating Segments”. fic Solutions division develops, produces and sells components and systems for traffic security. IFRS 8 follows the management approach. Accordingly the external reporting is based on the Group internal organizational The main focus of the Defense & Civil Systems segment is on and management structure as well as on the internal reporting the areas of road vehicle, train and aircraft equipment, structure to the chief operating decision maker. The Executive mechanical and stabilization technology, energy systems and Board analyzes the financial information which serves as a deci- opto-electronic systems. sion basis for the allocation of resources and for measuring profitability.T he accounting policies for the segments are the JENOPTIK AG, JENOPTIK SSC GmbH, the property companies same as those for the Group described under accounting prin- and other non-strategic companies are included in the segment ciples. An important management indicator within the com- Other. It also includes the sale proceeds from the discontinu- pany is the free cash flow. ance of the business division amounting to TEUR 24,501.

For the fiscal year 2010 segment reporting is on the segments The item Adjustments includes the consolidation of the busi- Lasers & Optical Systems, Metrology, Defense & Civil Systems ness relationships between the segments as well as certain and Other. reconciliation and reclassification issues.

Business activities can be analyzed into five divisions and three The business relationships between companies within the divi- segments. Segmentation of the business divisions is oriented sions of the Jenoptik Group are based on prices which would towards the internal divisional structure, whereby the Lasers & also be agreed with third-parties. Material Processing and Optical Systems divisions are combined to form the Laser & Optical Systems segment and the Industrial Order intake relates to the estimated volume of sales for the Metrology and Traffic Solutions divisions are combined to form contracts taken on after income reductions under consideration the Metrology segment. The Defense & Civil Systems segment of changes in the contract value. Notices of intention are not represents the division with the same name. included in the order intake.

The Lasers & Optical System segment offers the complete value- The research and development item consists of the develop- added chain of laser material processing from the component ment expenses within customer contracts, capitalized develop- through to complete systems. The Optical Systems division ment expenses and depreciation on them as well as research within the Lasers & Optical Systems segment offers opto-mecha and development expenses. nical & opto-electronical assemblies, modules and systems and is development and production partner for optical, micro-opti- Free cash flow is calculated from cash flow from operating cal and optical coating components – made of optical glass, activities (before income taxes) less investments in intangible infra-red materials and of plastics. assets and tangible assets plus disinvestments.

140 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Segment reporting Notes to the consolidated financial statements additional information

Information by Segment

Lasers Defense of which & Optical & Civil discontinued in TEUR Systems Metrology Systems bus. div. 1) Other Adjustments Group Sales 188,943 113,805 205,843 31,897 24,444 – 22,388 510,647 (166,749) (95,973) (205,272) (32,271) (23,820) (– 18,205) (473,609) of which Germany 56,503 38,192 107,840 6,209 24,441 – 21,707 205,269 (52,014) (37,222) (106,787) (6,279) (23,817) (– 17,831) (202,009) European Union 56,301 18,790 45,729 10,139 0 0 120,820 (47,604) (21,036) (62,242) (16,801) (0) (0) (130,882) Other Europe 4,233 4,615 24,693 1,426 3 – 3 33,541 (4,881) (6,108) (17,079) (9) (0) (0) (28,068) NAFTA 39,393 17,230 14,467 5,899 0 – 678 70,412 (39,343) (14,587) (9,304) (3,783) (3) (– 374) (62,863) South East Asia / Pacific 19,747 15,138 11,645 8,224 0 0 46,530 (16,579) (11,171) (8,486) (5,399) (0) (0) (36,236) Other 12,766 19,840 1,469 0 0 0 34,075 (6,328) (5,849) (1,374) (0) (0) (0) (13,551) Sales with other business divisions 3,566 10 1,195 0 17,617 – 22,388 0 (1,102) (12) (1,760) (0) (15,332) (– 18,206) (0) EBITDA 2) 24,027 12,070 18,960 4,077 33,642 – 5 88,694 EBITDA before reorganization and restructuring 3) (13,471) (– 1,625) (19,492) (3,589) (11,744) (– 44) (43,038) EBIT 13,327 8,588 11,533 2,879 22,967 – 5 56,410 EBIT before reorganization and restructuring 3) (– 704) (– 6,202) (12,142) (2,093) (2,583) (– 44) (7,775) EBIT after reorganization and restructuring (– 16,509) (– 14,615) (12,142) (2,093) (– 626) (– 44) (– 19,652) Result from investments in associates and – 1,523 0 0 0 0 0 – 1,523 joint ventures (– 1,799) (0) (0) (0) (0) (0) (– 1,799) Result from other investments – 1,526 – 420 170 0 1,330 0 – 446 (– 1,587) (– 529) (247) (0) (– 625) (0) (– 2,494) Earnings after tax before profit / loss transfer 9,533 8,008 9,235 2,905 9,671 – 4 36,443

(– 21,622) (– 16,444) (9,171) (1,780) (– 4,930) (– 30) (– 33,855) financial statements consolidated Research and development expenses 12,581 8,560 8,962 1,946 278 – 347 30,034 (15,660) (8,297) (9,013) (1,791) (0) (– 368) (32,602) Research and development output 17,534 12,432 21,522 5,259 278 – 347 51,419

(22,017) (11,855) (17,974) (1,675) (0) (– 368) (51,478) es ot

Free cash flow (before income taxes) 24,911 2,520 15,527 1,361 – 10,047 0 32,911 N (17,644) (6,659) (17,755) (3,513) (– 1,010) (0) (41,048) Working capital 43,287 35,812 91,030 0 – 5,432 – 65 164,632 (44,394) (31,612) (96,301) (7,453) (– 5,804) (– 63) (166,440) Group Order intake 230,198 136,992 211,620 47,911 24,444 – 20,760 582,494 (168,358) (83,234) (178,039) (40,022) (16,411) (– 13,206) (432,836) Tangible assets, investment properties and 88,540 15,490 32,226 0 97,609 0 233,865 intangible assets (92,590) (17,040) (38,066) (4,280) (106,846) (0) (254,542) Investments excluding 6,241 2,331 4,991 811 1,769 0 15,332 company acquisitions (4,169) (2,548) (5,419) (944) (2,216) (0) (14,352) Depreciation and amortization 10,365 3,482 6,251 1,198 5,213 0 25,311 (12,262) (3,945) (7,132) (1,496) (5,248) (0) (28,587) Impairments 335 0 1,176 0 5,462 0 6,973 (8,164) (2,124) (218) (0) (3,913) (0) (14,419) Employees (annual average) 1,181 621 976 128 150 0 2,928 (without trainees) (1,281) (762) (1,029) (126) (134) (0) (3,206) additional information

EBIT = operating result EBITDA = Earnings before interest, taxes, depreciation and amortization 1) bus. div. = business division 2) Group EBITDA adjusted for one-off effects amounts to TEUR 61.831 3) Figure published in the prev. year cannot be compared as it did not include Group charges (The amounts in brackets relate to the prior year)

JENOPTIK 2010 141 Notes to the consolidated financial statements Segment reporting

Working capital comprises inventories, trade accounts receiv- There were no relationships with individual customers whose able and receivables from construction contracts less trade share of sales is material relative to Group sales. accounts payable, liabilities from construction contracts and on account payments received. The share in joint ventures amounting to TEUR 246 (2009 TEUR 261) is entirely attributable to the Lasers & Optical Sys- Non-current assets comprise intangible assets and tangible tems segment. The joint venture company accounted for assets. proportionally in the consolidation is included in the Defense & Civil Systems segment.

Reconcilliation of segment information

Reconcilliation of free cash flows in TEUR 2010 2009 Cash flow from / used in operating activities before income taxes 44,972 53,841 Investments in intangible and tangible assets – 15,265 – 14,067 Receipts from operative disposals of intangible and tangible assets 3,204 1,274 Free-cash flow (before income taxes) 32,911 41,048

Information by region in TEUR 31.12.2010 1) 31.12.2009 1) Group 233,865 254,855 of which Germany 2) 223,252 241,663 European Union 2) 1,939 4,999 Other Europe 2) 116 82 NAFTA 2) 8,558 8,111

1) non-current assets 2) by location of the companies

142 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the comprehensive statement of income Notes to the consolidated financial statements additional information

Notes to the 4 Selling expenses comprehensive statement of income Selling expenses mainly comprise marketing costs, sales commissions, publicity work and advertising. Selling expenses increased overall by TEUR 3,090 or 6.0 percent to TEUR 54,411 1 Sales compared to 2009. Sales increased overall by TEUR 37,038 or 7.8 percent to TEUR 510,647 compared to 2009. 5 General administrative expenses General administrative expenses include personnel and non- Detailed disclosures on sales by segment and region are shown personnel costs as well as depreciation and amortization relat- in the segment reporting. ing to the administration function. General administrative expenses rose by TEUR 1,594 or 4.4 percent to TEUR 38,055 2 Cost of sales compared to 2009. Cost of sales includes the costs incurred in generating sales. This item also includes provisions made for transactions depen- Furthermore, general administrative expenses include audit dent on sales. fees, year-end audit fees of TEUR 649 (2009 TEUR 630), out of period fees for year-end audit of TEUR 154 (2009 TEUR 0), Cost of sales increased overall by TEUR 8,480 or 2.5 percent to fees for other auditor services of TEUR 26 (2009 TEUR 39), fees TEUR 353,402 compared to 2009. Cost of sales rose less than for other advisory services of TEUR 78 (2009 TEUR 32) and proportionally compared to sales. no tax fees (2009 TEUR 1).

Cost of sales includes impairment losses on intangible and tan- 6 Other operating income gible assets amounting to TEUR 257 (2009 TEUR 192). in TEUR 2010 2009 Income from a discontination of 3 Research and development expenses financial statements consolidated business division 24,501 0 Research and development expenses include all expenses allo- Income from exchange gains 8,079 7,716 cable to research and development. Research and development Income from sale of shares 4,629 0

costs paid for by customers are not included in the research Income from government grants 3,124 2,079 es ot and development expenses. Income from release of allowances / N provisions 2,103 2,070 Income from services, transfers and rental 1,662 5,793 Research and development expenses decreased overall by Group Income from disposal of fixed assets 627 320 TEUR 2,568 or 7.9 percent to TEUR 30,034 compared to 2009. Income from issue of licenses 412 296 The reason for the decline was that the prior year included Income from compensation / research and development expenses for the mid format camera insurance payments 412 278 business unit which was discontinued. Research and develop- Miscellaneous 2,205 3,266 ment expenses do not contain any write-downs (2009 Income from the release of accrual for interim profits 0 1,239 TEUR 1.514). Total 47,754 23,057 additional information

JENOPTIK 2010 143 Notes to the consolidated financial statements Notes to the comprehensive statement of income

In the fiscal year 2010 other operating income amounted to Other operating expenses fell compared to the prior year by TEUR 47,754. This is mainly due from the discontinuation of a TEUR 24,923 to TEUR 26,089. The prior year included expenses business division amounting to TEUR 24,501. for reorganization and restructuring amounting to TEUR 27,427.

Income from exchange rate gains mainly includes gains on Under expenses from services and rental offsetting was possi- exchange rate fluctuations on foreign exchange receivables and ble in the current fiscal year between other operating income payables between transaction date and payment date and and expenses which led to a reduction in income and in expen- exchange gains from the balance sheet date rate valuation. diture. Exchange losses from these transactions are disclosed under other operating expenses. 8 Net investment result

Under income from services, transfers and rental offsetting was in TEUR 2010 2009 possible in the current fiscal year between other operating Result from investments 2,962 540 income and expenses which led to a reduction in income and Results from investments in associates and joint ventures – 1,523 – 1,799 in expenditure. Write-downs on financial assets and on non-current asset securities – 3,408 – 3,034 7 Other operating expenses Total – 1,969 – 4,293 in TEUR 2010 2009 The write-downs on financial assets and on non-current asset Exchange losses 6,820 7,994 securities primarily relate to write-downs against loans to Costs of services and rental 3,674 6,956 investments. Impairment of goodwill 2,884 2,031 Impairment losses tangible assets / investment properties 2,656 682 9 Net interest result Expenses of reorganization and restructuring 2,267 27,427 in TEUR 2010 2009 Expenses for location integration 1,742 0 Guarantee income 386 641 Amortization of intangible assets on Income from securities and first-time consolidation 1,621 1,647 financial asset loans 142 465 Expenses for consulting services 1,484 0 Other interest and similar income 1,238 670 Losses on disposal of fixed assets 288 453 Interest income on release / Expenses of SAP implementation 228 0 repurchase of convertible bond 0 956 Increases / reversals of provisions and Total interest income 1,766 2,732 allowances 164 1,504 Interest portion on increase to pension Other taxes 160 325 provisions less interest on plan assets 1,520 727 Miscellaneous 2,101 1,993 Interest portion of leasing installments for finance leases 356 441 Total 26,089 51,012 Interest expenses on debenture loan (impacting cash) 193 1,859 Additions to allowances are only included under other operat- Other interest and similar expenses 11,663 8,830 ing expenses if these are outside of the ordinary activities of the Interest portion from loans 0 1,245 relevant company. Total interest expenses 13,732 13,102 Net interest result – 11,966 – 10,370

144 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the comprehensive statement of income Notes to the consolidated financial statements additional information

The net interest result worsened by TEUR 1,596 to minus For foreign companies the calculation of deferred taxes is TEUR 11,966 (2009 minus TEUR 10,370). A major reason for based on the tax rates applicable in each relevant country. this was the inclusion in the year 2009 of a one-off income from the release of the convertible bond (TEUR 956) which is Deferred taxes are included in the statement of comprehensive not matched by a relevant item in 2010. Furthermore, the income as tax income or tax expense unless they relate to items interest level has increased due to a financial structure geared not impacting income, which are accounted for directly in to the long-term. The prior year was still dominated by the high equity. In this case the deferred taxes are also accounted for use of current but also lower interest-bearing current account through equity having no impact on income. credits. The tax expense which relates to the result of the ordinary Through the changed financial structure ofJ ENOPTIK AG the activities is classified according to its origin as follows: interest expense on debenture loans fell significantly to TEUR 193 (2009 TEUR 1,859). Loans were not issued in 2010 in TEUR 2010 2009 and, thus, no expense has been incurred (2009 TEUR 1,245). Current income taxes Domestic 1,392 – 181 The item interest expense from the increase in pension provi- Foreign – 80 397 sion includes actuarial losses included in the statement of com- Total 1,312 216 prehensive income, amounting to TEUR 846 (2009 TEUR 0). Deferred tax expense and income Domestic 4,137 – 706 The interest portion of the leasing installments for finance leas- Foreign 583 30 Total 4,720 – 676 ing amounts to TEUR 356 (2009 TEUR 441). Total income taxes 6,032 – 460

10 Income taxes

Income taxes comprise the current taxes (paid or owed) on Current income taxes include a tax credit of TEUR 515 (2009 financial statements consolidated income in the individual countries as well as the deferred taxes. income TEUR 285) for current taxes of prior financial periods. The calculation of the current tax expense for the Jenoptik The deferred tax expense and income include a credit from a

Group is subject to the tax rates applicable at the balance sheet previous year of TEUR 238 (2009 credit TEUR 573). es ot date. N The deferred tax expense and income include an expense of

Deferred taxes are calculated at the relevant national income TEUR 47 (2009 income TEUR 3,533) based on the development Group tax rates. For domestic companies the corporation tax rate for of timing differences. the fiscal year 2010 amounted to 15 percent (2009 15 percent) plus solidarity levy of 5.5 percent (2009 5.5 percent) of the cor- At the balance sheet date the Jenoptik Group has unused tax poration tax charge. Accounting for the effective trade tax rate losses carried forward of approx. EUR 472 million (2009 of 12.78 percent (2009 12.78 percent) in 2010 the overall tax EUR 492 million) which can be set off against future profits. rate used for calculating deferred taxes amounted to 28.6 per- The reduction in tax losses carried forward amounting to cent (2009 28.6 percent). EUR 20 million results from profit offsetting, restructuring transactions as well as external tax reviews. Of these losses additional information

JENOPTIK 2010 145 Notes to the consolidated financial statements Notes to the comprehensive statement of income

EUR 455 million (2009 EUR 478 million) can be carried forward tinued. As part of this process the deferred tax expense from for an unlimited period of time. After accounting for all cur- the release of deferred tax assets is, depending on the tax sub- rently known positive and negative influencing factors on the ject characteristic, allocated to the tax group head and, thus to future tax results of the Jenoptik Group, it is expected that the continuing business divisions. With regard to the remaining tax losses carried forward of approx. EUR 104 million (2009 losses carried forward of EUR 368 million (2009 EUR 370 mil- EUR 122 million) will be utilized. With regard to these utilizable lion) no deferred tax asset has been accounted for. Further- losses carried forward, a deferred tax asset has been accounted more, no deferred tax asset has been accounted for deductible for amounting to EUR 38 million (2009 EUR 43 million). Of this, timing differences of EUR 47 million (2009 EUR 48 million). EUR 21 million (2009 EUR 23 million) relate to trade tax losses carried forward. The lower deferred tax asset on the losses car- The following deferred tax assets and liabilities have arisen from ried forward arises on the one hand from the utilization of recognition and measurement differences on individual balance losses carried forward and, on the other hand, deferred tax sheet items and on tax losses carried forward: assets were released in connection with business units discon-

Deferred tax assets Deferred tax liabilities in TEUR 31.12.2010 31.12.2009 31.12.2010 31.12.2009 Intangible assets 689 679 3,633 4,425 Tangible assets 3,692 3,968 3,381 1,130 Financial assets 12,574 11,709 1,416 783 Inventories 1,672 1,769 101 153 Accounts receivable and other assets 4,674 4,648 1,504 3,621 Provisions and accrued expenses 10,535 6,742 1 62 Liabilities 1,333 3,630 2,093 2,229 Tax losses carried forward, interest carried forward and tax credits 38,027 43,473 0 0 Gross value 73,196 76,618 12,129 12,403 (of which long-term) (56,536) (66,518) (8,954) (6,990) Allowances – 13,876 – 14,584 0 0 Offsetting – 8,425 – 9,938 – 8,425 – 9,938 Balance sheet amount 50,895 52,096 3,704 2,465

146 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the comprehensive statement of income Notes to the consolidated financial statements additional information

in TEUR 2010 2009 Earnings before tax 42,475 – 34,315 Income tax rate Jenoptik Group 28.6 % 28.6 % Expected tax expense 12,148 – 9,814 Tax impact of the following effects led to a difference between actual and expected tax expense: Non-deductible expenses and tax-free income – 7,621 1,111 Changes in allowances against deferred taxes and the non-recognition of deferred taxes 2,645 7,852 Permanent differences – 532 1,288 Effects of tax rate differences in 2010 394 135 Effects of tax rate changes 23 39 Taxes from previous years – 792 – 858 Other tax effects – 233 – 213 Total adjustments – 6,116 9,354 Actual tax expense 6,032 – 460

The table above shows the tax reconciliation of the expected 12 Earnings per share tax expense for the relevant fiscal year to the actual tax The earnings per share represents the earnings attributable expense disclosed. In order to calculate the expected tax to shareholders divided by the weighted average number of charge the Group tax rate valid for the fiscal year 2010 of shares outstanding of 56,254,446 (2009 52,034,651). 28.6 percent (2009 28.6 percent) was multiplied by the earnings before tax. 2010 2009 Earnings attributable to TEUR 11 Minority interest share of profit / loss shareholders in 36,582 – 37,927 financial statements consolidated Weighted average of The minority interest share of Group results amounts to minus outstanding shares 56,254,446 52,034,651 TEUR 139 (2009 TEUR 4,072) and relates to the minority shares Earnings per share in euro 0.65 – 0.73

in a consolidated company. es ot N Group additional information

JENOPTIK 2010 147 Notes to the consolidated financial statements Notes to the balance sheet

Notes to the balance sheet

13 Intangible assets

Patents, trademarks, software, Other Development customer intangible in TEUR costs relations Goodwill assets Total Purchase and manufacturing cost 18,956 42,295 65,857 3,211 130,319 Balance as at 1.1.2010 (25,634) (42,702) (64,917) (1,709) (134,962) Currencies 22 186 193 – 4 397 (– 2) (– 65) (– 91) (0) (– 158) Companies included in consolidation 0 – 1,394 – 235 – 3 – 1,632 (– 1,491) (– 74) (1,031) (0) (– 534) Additions 481 888 0 706 2,075 (1,056) (848) (0) (1,856) (3,760) Disposals 0 925 86 71 1,082 (6,241) (1,450) (0) (65) (7,756) Reclassifications (+ / –) 286 1,594 0 – 1,880 0 (0) (334) (0) (– 289) (45) Balance as at 31.12.2010 19,745 42,644 65,729 1,959 130,077 (18,956) (42,295) (65,857) (3,211) (130,319) Depreciation Balance as at 1.1.2010 13,501 32,067 6,802 0 52,370 (11,829) (29,331) (4,771) (102) (46,033) Currencies 22 58 0 0 80 (– 2) (– 19) (0) (0) (– 21) Companies included in consolidation 0 – 1,244 0 0 – 1,244 (– 1,491) (– 74) (0) (0) (– 1,565) Additions 1,226 3,545 1 0 4,772 (2,579) (3,598) (0) (0) (6,177) Impairment 161 15 2,884 0 3,060 (6,816) (463) (2,031) (0) (9,310) Disposals 0 1,172 169 0 1,341 (6,230) (1,358) (0) (0) (7,588) Reclassifications (+ / –) – 68 68 0 0 0 (0) (126) (0) (– 102) (24) Balance as at 31.12.2010 14,842 33,337 9,518 0 57,697 (13,501) (32,067) (6,802) (0) (52,370) Net book value as at 31.12.2010 4,903 9,307 56,211 1,959 72,380 (5,455) (10,228) (59,055) (3,211) (77,949)

(The amounts in brackets relate to the prior year)

148 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

The changes in the companies consolidated relate to the dis- The discount rate used, amounting to 7.84 percent (2009 posal of the intangible assets of the discontinued business divi- 8.26 percent), has been taken from a current capital cost study sion. for companies within the HDAX. It represents the weighted average capital costs of the Jenoptik Group before taxes. Apart from goodwill there are no intangible assets with an infinite useful life. As a result of the impairment test impairment losses of TEUR 2,884 (2009 TEUR 2,031) were accounted for in the fiscal year There are no restrictions on use of intangible assets. 2010. The impairment relates exclusively to the CGU Photonic Sense. This impairment adjustment was made since the busi- Existing goodwill results almost exclusively from company ness forecast does not expect further impairment. The impair- acquisitions since January 1, 2003. ment losses were accounted for as other operating expenses in the statement of comprehensive income. The recoverable The impairment test is carried out at the level of the cash gen- amount from impairment testing is smaller than the carrying erating unit (CGU) which benefits from the synergies of the value of the CGU and, therefore the goodwill allocated to the relevant business combination and is the lowest level at which CGU is adjusted for in full. An additional impairment loss was goodwill is monitored for internal company management. not required. During the fiscal year 2010 a newCGU bearing goodwill arose due to the merger of EPIGAP Optoelektronik GmbH with Goodwill amounts to TEUR 54,090 as at December 31, 2010. JENOPTIK Polymer Systems GmbH. JENOPTIK Polymer Systems Of this TEUR 38,068 relate to CGU Optoelectronic Systems, GmbH and the Digital Imaging business unit of JENOPTIK TEUR 7,920 relate to CGU Lechmotoren, TEUR 3,071 relates to Optical Systems GmbH are part of this CGU. the Laser CGU and TEUR 2,660 to the CGU Metrology. Thus 80 percent of goodwill relates to Lasers & Optical Systems, If the carrying amount of a CGU is higher than its recoverable 15 percent to Defense & Civil Systems and 5 percent to Metrol- amount then the allocated goodwill should be written down ogy. financial statements consolidated in accordance with the impairment amount. The impairment test is based on the recoverable amount, i. e., the higher of its For all group companies and CGUs to which goodwill is allo-

fair value less costs to sell and its value in use. cated as at December 31, 2010 a sensitivity analysis was car- es ot

ried out. Even a reduction in cash flows of 15 percent and a N Jenoptik determines the value in use based on the discounted simultaneous increase in the discount rate by 3 percent to cash flow method. The basis for this is the 5-year business fore- 10.84 percent would not lead to a lower recoverable amount Group cast as approved by management. This accounts for the experi- than carrying amount. ence of the past and is based on the management’s best esti- mate of the future development. A perpetuity is assumed which is derived individually by management for each CGU from the fifth forecast year. additional information

JENOPTIK 2010 149 Notes to the consolidated financial statements Notes to the balance sheet

14 Tangible assets

Other equipment, Technical factory Land, equipment and office Assets under in TEUR buildings and machines equipment construction Total Purchase and manufacturing cost 132,637 136,330 84,961 2,968 356,896 Balance as at 1.1.2010 (134,142) (133,035) (82,753) (6,554) (356,484) Currencies 457 1,086 292 0 1,835 (– 169) (– 448) (– 108) (0) (– 725) Companies included in consolidation 0 – 1,310 – 9,592 – 182 – 11,084 (0) (– 355) (– 79) (0) (– 434) Additions 548 5,558 4,167 2,984 13,257 (851) (3,553) (4,459) (1,729) (10,592) Disposals 2,749 4,199 2,652 157 9,757 (2,217) (2,405) (2,771) (1,583) (8,976) Reclassifications (+ / –) – 1,681 1,610 578 – 2,453 – 1,946 (30) (2,950) (707) (– 3,732) (– 45) Balance as at 31.12.2010 129,212 139,075 77,754 3,160 349,201 (132,637) (136,330) (84,961) (2,968) (356,896) Depreciation 42,884 98,027 63,842 0 204,753 Balance as at 1.1.2010 (38,507) (88,487) (59,001) (0) (185,995) Currencies 167 870 241 0 1,278 (– 67) (– 351) (– 90) (0) (– 508) Companies included in consolidation 0 – 902 – 7,718 0 – 8,620 (0) (– 355) (– 79) (0) (– 434) Additions 3,922 9,681 6,374 0 19,977 (4,400) (9,729) (7,504) (0) (21,633) Impairment 152 333 1,096 0 1,581 (1,860) (2,334) (47) (0) (4,241) Disposals 2,143 3,351 3,121 0 8,615 (1,816) (1,817) (2,517) (0) (6,150) Reclassifications (+ / –) – 465 – 119 26 0 – 558 (0) (0) (– 24) (0) (– 24) Balance as at 31.12.2010 44,517 104,539 60,740 0 209,796 (42,884) (98,027) (63,842) (0) (204,753) Net book value as at 31.12.2010 84,695 34,536 17,014 3,160 139,405 (89,753) (38,303) (21,119) (2,968) (152,143)

(The amounts in brackets relate to the prior year)

Of impairment losses of TEUR 1,581 (2009 TEUR 4,241) Restrictions on use of tangible assets amount to TEUR 50 TEUR 257 (2009 TEUR 192) were recorded in cost of sales (2009 TEUR 445). Tangible assets order commitments amount and of TEUR 1,324 (2009 TEUR 4,801) in other operating to TEUR 4,788 (2009 TEUR 709). expenses. These result from extraordinary depreciation due to lack of economic usefulness. A grant amounting to TEUR 316 was deducted from the acquisition costs of tangible assets.

150 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

Group land and buildings amount to TEUR 84,695 (2009 During the fiscal year 2010 eclassificationsr were carried out TEUR 89,753) and mainly include the production and adminis- from tangible assets to investment properties since the relevant tration buildings in Jena, Triptis, Villingen-Schwenningen and properties now fulfill the criteria ofIAS 40. The purchase and in Altenstadt. manufacturing costs of the reclassified properties amount to TEUR 1,946 (2009 TEUR 0). 15 Investment properties The measurement of investment properties is at amortized cost Investment in TEUR properties amounting to TEUR 22,080 (2009 TEUR 24,450). During the Purchase and manufacturing cost 35,212 fiscal year write-downs ofTEUR 2,332 (2009 TEUR 868) were Balance as at 1.1.2010 (52,657) accounted for. Current expert valuation reports are available for Companies included in consolidation 15 (– 17,445) the individual properties. For the remaining properties fair value Additions 0 (where there is a lack of current market data) is principally (0) determined based on the discounted cash flow method.U nder Disposals 987 this method the net rentals are determined and discounted (0) Reclassifications 1,946 over the total remaining useful lives. The interest rates applied (0) represent normal market interest rates accounting for an infla- Balance as at 31.12.2010 36,186 tion deduction and risk premium. The fair value of the invest- (35,212) ment properties thus calculated amounts to TEUR 24,166 (2009 Depreciation 10,762 Balance as at 1.1.2010 (17,863) TEUR 29,878). Companies included in consolidation 15 (– 8,746) Rental income from investment properties held at the year end Additions 562 (777) amounted to TEUR 2,162 (2009 TEUR 2,302). Impairment 2,332 (868) The direct operating costs for the rented areas of the properties financial statements consolidated Disposals 123 (0) and equipment included in the financial statements at the Reclassifications 558 relevant year end amounted to TEUR 3,088 (2009 TEUR 1,644) (0)

for the fiscal year and for non-rented areas they amounted es

Balance as at 31.12.2010 14,106 ot

to TEUR 388 (2009 TEUR 105). The increase in direct operating N (10,762) Net book value as at 31.12.2010 22,080 costs is mainly due to the impairment losses recorded. (24,450) Group

(The amounts in brackets relate to the prior year)

Investment properties held at December 31, 2010 primarily include a property fund to which mainly properties located in the industrial area of Jena-Göschwitz belong. This property fund has been included in the consolidated financial statements in accordance with IAS 27 in conjunction with SIC-12. additional information

JENOPTIK 2010 151 Notes to the consolidated financial statements Notes to the balance sheet

16 Leasing The Group as lessor Two Group companies have concluded finance leasing con- Finance leasing tracts under which they are lessor. The Group as lessee Finance leases primarily include technical equipment and Firstly, a laser-annealing machine was leased to an American machinery. These are mainly rental purchase contracts or con- company. The lease has a term of 45 months, commencing in tracts with purchase options which are due to be exercised. April 2009. The contract partner has a purchase option. Until The borderline loan interest rates on which the contracts are the option is adopted, legal ownership remains with JENOPTIK based vary, depending on market position and timing of the Automatisierungstechnik GmbH, Jena. The leasing installments inception of the lease, between 5.4 percent and 9.5 percent. are not allocated evenly over the term. In the fiscal year 2010 write-downs of TEUR 112 (2009 TEUR 0) were made against The assets which are used under finance leases are included in leasing receivables. capitalized tangible assets at TEUR 4,528 (2009 TEUR 5,760). Their purchase and manufacturing costs amount to TEUR 9,884 Furthermore, digital speed measuring equipment has been (2009 TEUR 10,293) at the balance sheet date. delivered to Lithuania. The leasing contracts underlying this have a term of 76 and 83 months, commencing in August and In the fiscal year 2010 lease payments amounting toTEUR December 2009. The customer has a purchase option at the 1,404 (2009 TEUR 1,506) have been charged against income. end of the term. Until this time legal ownership remains with JENOPTIK Robot GmbH, Monheim am Rhein. Leasing payments due in the future can be seen from the following table: For the finance leasing transactions described, amounts due from finance leasing ofTEUR 3,272 (2009 TEUR 3,433) will be

Up to 1 – 5 More than accounted for in the current fiscal year. Outstanding minimum in TEUR 1 year years 5 years Total lease payments and present values are as follows: Minimum lease payments 1,253 2,361 1,094 4,708 Interest portion included in payments 282 656 112 1,050 Up to 1 – 5 More than Present value 971 1,705 982 3,658 in TEUR 1 year years 5 years Total Minimum lease payments 926 2,760 431 4,117 The discounted cash flow from the minimum lease payments Interest portion amounts to TEUR 3,658 (2009 TEUR 4,876). included in payments 78 600 167 845 Present value 848 2,160 264 3,272

Unrealized finance income amounts toTEUR 813 (2009 TEUR 999).

152 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

Operating leasing 17 Shares in associates and joint ventures The Group as lessee The balance of TEUR 246 (2009 TEUR 261) consists of shares in Operating leasing mainly consists of rental income for trade JT Optical Engine GmbH + Co. KG. properties as well as for office and data processing equipment. 18 Financial assets In the fiscal year lease payments amounting toTEUR 8,500 (2009 TEUR 7,443) have been charged against income. in TEUR 31.12.2010 31.12.2009 Shares in non-consolidated affiliated companies 3,404 4,168 As at the balance sheet date the Group has open commitments Investments 4,948 5,204 from non-cancellable operating leases which are due as follows: Loans to non-consolidated affiliated companies and investments 4,875 5,994 Non-current securities 1,799 1,612 Up to 1 – 5 More than Other loans 1,553 1,960 in TEUR 1 year years 5 years Total Total 16,579 18,938 Minimum lease payments from operating leases 7,942 21,250 32,728 61,920 During the fiscal year write-downs ofTEUR 899 (2009 TEUR 3,034) were accounted for. The minimum lease payments due in more than 5 years include a long-term rental agreement concluded in 2010 for office and 19 Other non-current assets production space. Other non-current assets include:

The Group as lessor in TEUR 31.12.2010 31.12.2009 Surplus amount from Within operating leases the Group rents out trade properties. pension obligation 3,870 5,452

Income from leasing tangible assets during the fiscal year Reinsurance coverage 1,481 1,399 financial statements consolidated amounted to TEUR 4,318 (2009 TEUR 4,470). Derivatives 499 869 Miscellaneous 3,230 3,317 Total 9,080 11,037 At the balance sheet date the following minimum lease pay- es ot ments are agreed between the Group and lessees: N Miscellaneous includes amounts due from leasing contracts

amounting to TEUR 2,453 (2009 TEUR 2,579). Group Up to 1 – 5 More than in TEUR 1 year years 5 years Total Minimum lease The derivatives relate to forward exchange contracts which payments from operating leases 4,337 15,547 3,428 23,312 provide long-term protection against risks. The whole item of derivative financial instruments is described in more detail in Note 35. Rental income with no specified term is included as the amount of rental income until the earliest possible date for cancellation. Probable sub-letting of space or extension options on rental contracts have not been included in the calculation. additional information

JENOPTIK 2010 153 Notes to the consolidated financial statements Notes to the balance sheet

20 Deferred taxes 22 Current accounts receivable The development of the balance sheet item of deferred taxes is and other assets described under Note 10. in TEUR 31.12.2010 31.12.2009 Trade accounts receivable 75,119 70,873 21 Inventories Receivables from non-consolidated affiliated companies 4,893 4,195 in TEUR 31.12.2010 31.12.2009 Receivables from investment companies 998 1,869 Raw materials, consumables and supplies 52,267 56,809 Other assets 22,298 16,378 Work in progress 83,858 81,822 Receivables from construction contracts 0 9,925 Finished goods and merchandise 12,672 16,034 Total 103,308 103,240 Total 148,797 154,665

Inventories decreased by TEUR 5,868 compared to the prior Trade accounts receivable rose compared to the prior year by year. TEUR 4,246 as a result of increased sales. The fair values of trade accounts receivable correspond with their carrying values. The fair value of inventories is represented by their carrying value. At the fiscal year end cumulative write-downs of Receivables from participating interests include receivables TEUR 27,826 (2009 TEUR 28,890) were accounted for against from joint ventures of TEUR 266 (2009 TEUR 355). the net realizable value. Reversals of previously written down assets amounted to TEUR 579 (2009 TEUR 400). At the balance sheet date there are no receivables from long- term construction contracts (31.12.2009 TEUR 9,925). This is For the credit lines of a subsidiary amounting to TEUR 30,000 mainly explained by the deconsolidation of Jena-Optronik in total, of which TEUR 4,693 (2009 TEUR 17,710) had been GmbH. taken up as at December 31, 2010, securities in the way of globally assigned trade receivables and inventories of the com- There are no further restrictions to access for other assets in pany have been assigned or pledged as security generally until addition to those outlined under Note 21. there is sufficient cover of the bank liabilities.A s at Decem- ber 31, 2010 these receivables amounted to TEUR 23,931 Bad debts are accounted for using allowances. Other current (2009 TEUR 21,902). Additionally, inventories of TEUR 70,919 receivables are predominately not subject to interest. (2009 TEUR 79,279) were pledged as security for the credit lines.

154 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

The following table shows the changes in allowances against Other current assets include: trade accounts receivable: in TEUR 31.12.2010 31.12.2009 Receivables from fixed deposit balances 9,000 0 in TEUR 2010 2009 Other receivables from tax authorities 4,640 4,734 Allowances at the beginning of the fiscal year 7,466 13,904 Receivables from pension trust 2,364 1,665 Additions 1,716 5,126 Accruals 2,177 2,507 Utilization 871 2,771 Derivatives 1,737 4,797 Release / write-off 3,531 8,801 Subsidies receivable 928 754 Currencies 7 8 Creditors with debit balances 363 147 Allowances at the end Other current assets 1,089 704 of the fiscal year 4,787 7,466 Third-party loans 0 1,070 Total 22,298 16,378

The ageing structure of trade accounts receivable is as follows: The whole item of derivative financial instruments is described in TEUR 31.12.2010 31.12.2009 in more detail in Note 35. Carrying values 75,119 70,873 of which neither overdue nor provided for 56,873 51,309 23 Securities held as current investments Overdue but not provided for 18,246 19,564 Securities available for sale of which less than 30 days 12,712 13,169 of which between 30 and 60 days 1,957 3,047 in TEUR 31.12.2010 31.12.2009 of which more than 60 days 3,577 3,348 Fair value 750 1,110

There was a further significant decline in overdue receivables Securities held as current investments mainly consist of money not provided for compared to the prior year. On December 31, market funds. financial statements consolidated 2010 these receivables amounted to TEUR 18,246 (2009 TEUR 19,564). Overdue receivables not provided for are princi- 24 Cash and cash equivalents

pally due from public contractors, the automotive industry and es

in TEUR 31.12.2010 31.12.2009 ot its suppliers. There was no need to make allowance for these N Cheques, cash in hand, credit bank at the balance sheet date because the receipt of payment is balances and funds due at any time expected at the amounts shown above. < 3 months 65,335 11,201 Group

The level of cash equivalents increased mainly due to the cash receipt in December 2010 for the sale of the discontinued business division. additional information

JENOPTIK 2010 155 Notes to the consolidated financial statements Notes to the balance sheet

25 Shareholders’ equity Templeton Investment Counsel LLC., Fort Lauderdale, USA, The development of JENOPTIK AG’s equity is shown in the communicated to the company that it had exceeded the statement of development of shareholders’ equity. threshold of 3 percent of the voting rights in JENOPTIK AG on September 13, 2010. Templeton Investment Counsel LLC. holds Subscribed capital 3.11 percent of the voting rights (1,780,218 bearer shares). All The capital markets committee authorized by the Supervisory these voting rights are allocated to Templeton Investment Board of JENOPTIK AG, agreed to the proposal of the Executive Counsel LLC. in accordance with § 22 (1) para. 1 No. 6 WpHG Board by resolution dated March 10, 2010, that the nominal (Securities Trading Act). capital of the company, under exclusion of subscription rights of the shareholders, be increased by a partial use of “autho- Voting rights announcements of the last few years and share- rized capital 2009” by EUR 13,529,006.40 by issuing 5,203,464 holders no longer active are also published on our website new no-par value bearer shares with a calculated share of under www.jenoptik.com in the area of Investors / Share / Voting nominal capital of EUR 2.60 per share against cash contribu- rights announcements. tions. The 5,203,464 new no-par value bearer shares were successfully placed at a placement price of EUR 4.25 per share. Authorized capital EUR 1.65 per share was accounted for as premium in the capi- By resolution of the Annual General Meeting on June 9, 2010 tal reserve. The capital increase was filed in the commercial the resolution “authorized capital 2009”, which was limited register on March 11, 2010. The nominal capital of the com- until May 30, 2014, was cancelled and redrafted as follows: pany now amounts to EUR 148,819,099.00 and is allocated to The Executive Board is authorized, with the approval of the 57,238,115 bearer shares. Supervisory Board, to increase the nominal capital of the company by up to TEUR 35,000 up to May 30, 2015 through one ECE Industriebeteiligungen GmbH, Vienna, announced in Feb- or several issues of new no-par value bearer shares in exchange ruary 2008 that it held 25.02 percent of the voting rights in for cash and / or non-cash contributions (“authorized capital JENOPTIK AG. Ms. Gabriele Wahl-Multerer, Munich, communi- 2010”). The new shares can be adopted by one or several cated to the company on March 3, 2011 that she had dropped banks under the obligation of offering them to shareholders below the threshold of 5 percent of voting rights in JENOPTIK AG (indirect subscription right). The Executive Board is authorized, on April 23, 2010. After this Ms. Gabriele Wahl-Multerer held with the approval of the Supervisory Board, to preclude the 4.96 percent of the voting rights (2,843,066 voting rights) at subscription rights of shareholders in certain cases. Preclusion April 23, 2010. Of these 4.96 percent (2,843,066 voting rights) is possible for fractional amounts, for capital increases in were due to her in accordance with § 22 (1) para. 1 No. 1 WpHG exchange for non-cash contributions, also in particular as part (Securities Trading Act) via VARIS Vermögensverwaltungs of business combinations or for the purchase of companies, GmbH. ZOOM Immobilien GmbH, Munich, communicated to parts of companies or investments in companies, for capital the company on March 3, 2011 that it had exceeded the increases in exchange for cash contributions to the extent that threshold of 3 percent of voting rights in JENOPTIK AG on Sep- the share of nominal capital attributable to the new shares, tember 3, 2010. ZOOM Immobilien GmbH now has a right to under consideration of Annual General Meeting resolutions or 4.84 percent of the voting rights (2,773,066 voting rights). The the use of other authorizations to preclude the subscription exceeding of the threshold of 3 percent arose through the rights under the direct or corresponding application of § 186 merger of VARIS Vermögensverwaltungs GmbH with ZOOM (3) para. 4 AktG (Stock Corporation Act) since this authorization Immobilien GmbH. became effective, neither exceeds a total of ten of one hundred (=10 percent) of the nominal capital in existence at the

156 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

time of filing this authorized capital, nor exceeds a total of ten Reserves of one hundred (=10 percent) of the nominal capital in exis- Reserves comprise the results generated in the past by compa- tence at the time of issue of the new shares and the issue price nies included in the consolidated financial statements and not of the new shares is not materially lower than the stock exchange distributed. Additionally, reserves include the adjustments price, as well as for the issue to employees of JENOPTIK AG and recorded from the first-time application ofIFRS and the differ- of companies with a majority affiliation with it. ences on capital consolidation which were offset against reserves up to December 31, 2002. The Executive Board, under approval by the Supervisory Board, decides on the details of the issue of the new shares, in partic- Furthermore, changes in the value of securities available for ular on their conditions as well as on the content of the rights sale to be accounted for without impacting income amounting of the new shares. to TEUR 962 (2009 TEUR 98) are included in reserves. Likewise, the effective part of the change in value of derivatives for Conditional capital hedging cash flows to be recorded with no impact on income By resolution of the Annual General Meeting on June 3, 2009 as part of hedge accounting is also included and amounts to the nominal capital of the company is conditionally increased minus TEUR 2,515 (2009 minus TEUR 2,143). by up to TEUR 23,400 through the issue of up to 9,000,000 new no-par value bearer shares (conditional capital 2009). The Movements in deferred taxes not impacting income increased conditional capital increase will only be executed to the extent reserves by TEUR 1,021 (2009 TEUR 847) in the fiscal year that the creditors or owners of the option certificates or con- 2010. Furthermore, TEUR 11,452 were reclassified from equity version rights, which were issued by the company or a domes- to other liabilities. This reclassification relates to the release of tic or foreign company in which the company holds a direct or minority interests in 2009 which resulted in an increase of the indirect majority holding, on the basis of an authorization reso- shareholders’ equity in the amount of TEUR 9,002 in the previ- lution of the Annual General Meeting dated June 3, 2009 by ous year.

May 30, 2014, exercises their option or conversion rights financial statements consolidated and / or – the creditors obliged to convert the issued convertible Own shares bonds, which were issued by the company or a domestic or On resolution of the Annual General Meeting on June 9, 2010

foreign company in which the company holds a direct or indi- the Executive Board was authorized to purchase own bearer es ot rect majority holding, by May 30, 2014, based on the resolu- shares by May 31, 2015 at a calculated maximum of ten from N tion of the Annual General Meeting dated June 3, 2009, fulfill one hundred of nominal capital (= 10 percent) for purposes their right to conversion and own shares are not utilized nor other than to deal in own shares. The purchased own shares Group fulfillment made in cash. together with own shares already purchased and still held by the company (including shares allocated under § § 71a ff. Stock The new shares participate in profits from the beginning of the Corporation Act) may not exceed 10 percent of nominal capital fiscal year for which, at the time of their issue, there is not yet a of the company. The authorization can be exercised either resolution by the Annual General Meeting for the appropriation completely or in partial amounts, once or several times in pur- of profit. The Executive Board is empowered to determine fur- suing one or several permitted purposes by the company or ther details of the issue and terms of the convertible and / or also by the Group companies or for its own or on behalf of option bonds and of the implementation of the conditional third-parties. A purchase is carried out as selected by the Exe capital increase. cutive Board as a purchase via the stock exchange or using a additional information public purchase bid. Further details of re-purchase of own

JENOPTIK 2010 157 Notes to the consolidated financial statements Notes to the balance sheet

shares are described in the publicly available invitation to the the amount of the benefit. For all benefit systems actuarial cal- Annual General Meeting 2010 on our Internet page under culations are required. www.jenoptik.com in the areas of Investors / Annual General Meeting. The authorization of the Executive Board to purchase The Group’s benefit commitment covers approximately 884 own shares by November 30, 2010, resolved by the Annual persons entitled, comprising 476 active employees, 73 former General Meeting dated June 3, 2009, was replaced with the employees and 335 pensioners and widows. new resolution at its effective date. In the years 2001 to 2002 parts of the pensions were transferred to the JENOPTIK Pension Trust e.V. by way of cumulative 26 Minority interests assumption of liabilities. The minority interests in shareholders’ equity relate to a foreign company. The plan assets held in the JENOPTIK Pension Trust e.V. are offset against the pension commitments in accordance with IAS 19. 27 Provisions for pensions and similar obligations Pension provisions: Provisions for pensions are set up on the basis of provision plans for commitments for old-age, invalidity and death cover. in TEUR 31.12.2010 31.12.2009 Present value of funded obligations 32,487 29,795 The cover by the Group varies depending on the legal, tax and Present value of unfunded obligations 7,305 6,726 economic situation of each country and depends, as a rule, on Fair value of plan assets – 25,678 – 25,711 the length of service and the salary of the employee. Pension Present value of net obligation 14,114 10,810 provision within the Group is based on both defined contribu- Unrecorded actuarial losses – 11,541 – 9,844 tion and defined benefit plans. Under defined contribution Net liability recorded in the balance sheet 2,573 966 plans the company pays contributions on the basis of statutory of which disclosed as or contractual conditions or on a voluntary basis to state or pri- other asset 3,870 5,451 of which disclosed as vate pension plans. pension obligation 6,443 6,417

Once the contribution has been paid there are no further obligations for the company. Change in defined benefit obligation( DBO):

Most pension plans are based on defined benefit plans, in TEUR 2010 2009 whereby these are distinguished between provision-based and DBO as at 1.1. 36,520 32,324 externally financed pension plans. Current service cost for fiscal year 470 426 Interest cost 1,874 1,927 Pension provisions for the benefit obligations are determined in Termination and curtailment of plans 0 0 Actuarial losses 2,508 3,392 accordance with the projected unit credit method, which is Transfers 0 0 common internationally, in accordance with IAS 19. Under this Disinvestments 0 0 method future commitments are valued at the balance sheet Pension payments – 1,580 – 1,549 date according to proportional benefits earned and trend DBO as at 31.12. 39,792 36,520 assumptions are considered for the relevant values which affect

158 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

Net expense recognized in the consolidated income statement: Portfolio structure of plan assets:

in TEUR 2010 2009 in percent 31.12.2010 31.12.2009 Current service cost 470 426 Shares and investments (available for sale) 28 30 Interest cost 1,874 1,927 Loans Expected return on plan assets – 1,200 – 1,200 (loans and receivables) 53 57 Offsetting of actuarial gains and losses 846 0 Funds 19 13 Effects of curtailments and settlements 0 0 Total 100 100 Costs of claims purchased in the fiscal year 0 0 Total expense 1,990 1,153 Actuarial assumptions:

The above amounts are included in the personnel costs of the in percent 31.12.2010 31.12.2009 functional areas; interest costs on obligations are included in Discount rate 4.65 5.15 Return on plan assets 4.67 4.29 other net interest under Note 9. Future salary increases 2.75 2.75 Future pension increases 2.0 1.75 to 2.0 Changes in plan assets: in TEUR 2010 2009 The planned return on plan assets is determined based on a Plan assets as at 1.1. 25,711 27,990 uniform method and reflects the expected eturnr on the whole Expected return on plan assets 1,200 1,200 portfolio. The assumptions for the expected return orientate Actuarial losses – 36 – 3,730 themselves toward the portfolio structure, the long-term actual Employer contributions (funding) 0 1,365 asset income of the past, as well as the long-term returns Employees own amounts 0 0 expected in the future. The actual return on plan assets in the Acquisitions 0 0

TEUR financial statements consolidated Transfers 0 0 fiscal year 2010 amounted to 1,165. Pension payments – 1,198 – 1,114 Plan assets as at 31.12. 25,678 25,711 Actuarial gains or losses result from changes in balances and

differences in actual trends (e. g. salary increases, pension es ot

increases) compared to the calculation assumptions. In accor- N In the fiscal year 2010 there were no additions to plan assets. dance with IAS 19 this amount is recorded over the future aver-

age remaining service lives of the employees and recognized as Group income or expense if, at the beginning of the fiscal year the net cumulative unrecognized actuarial gains or losses exceed 10 percent of the higher of the pension commitment, or the fair value of plan assets at the beginning of the fiscal year. additional information

JENOPTIK 2010 159 Notes to the consolidated financial statements Notes to the balance sheet

Historical information:

in TEUR 31.12.2010 31.12.2009 31.12.2008 31.12.2007 31.12.2006 Present value of the defined benefit obligation 39,792 36,520 32,324 33,456 37,060 Fair value of plan assets – 25,678 – 25,711 – 27,990 – 30,046 – 29,322 Plan deficit 14,114 10,810 4,334 3,410 7,738 Experience adjustments of the obligation – 19 – 132 – 38 – 134 – 101 Experience adjustments of the plan assets 2,526 3,524 – 1,988 – 4,490 – 3,098

The experience adjustments result from the difference between previous actuarial assumptions and what has actually occurred.

28 Tax provisions Taxes are described in detail under Note 10.

29 Other provisions and accrued expenses The development of other provisions and accrued expenses is as follows:

Obligations from Trademark Provision Potential Warranty property Restruc- and Miscella- in TEUR Personnel from sale losses obligations sales turing license fees neous Total Balance as at 1.1.2010 12,587 416 17,000 8,567 2,743 10,818 1,662 5,343 59,136 Currencies 24 0 78 11 0 42 0 22 177 Companies included in consolidation – 968 0 0 – 282 0 0 0 – 1,588 – 2,838 Increases 12,551 11,422 11,580 9,112 0 2,434 0 5,790 52,889 Compound interest 140 0 262 – 89 208 0 0 – 3 518 Utilization 6,635 55 625 4,540 347 9,322 23 1,459 23,006 Release 427 1,429 2,380 891 447 532 0 1,244 7,350 Reclassifications 0 6,799 – 10,071 0 3,272 0 0 0 0 Balance as at 31.12.2010 17,272 17,153 15,844 11,888 5,429 3,440 1,639 6,861 79,526

Material items within personnel provisions are part-time early The provisions from sale include expenses and accruals from retirement of TEUR 5,983 (2009 TEUR 6,228) and long-term sale of discontinued business divisions and contractual commit- service awards of TEUR 1,694 (2009 TEUR 1,450). Additionally, ments and legal and consulting costs in connection with these. personnel provisions include performance premiums, profit These include a reclassified amount ofTEUR 6,799 from pend- sharing and similar obligations. ing losses, since these relate to past disposals.

160 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

The provisions for property sales include risks in connection The expected cash flows of other provisions and accrued with the property assets, including obligations for the payment expenses are as follows: of maintenance expenses and for adoption of rental guarantees. Up to 1 – 5 More than in TEUR 1 year years 5 years 31.12.2010 The provision set up in the prior year of TEUR 9,322 for restruc- Personnel 11,068 5,634 570 17,272 turing was utilized in the current fiscal year. This included costs Provision from sale 14,553 2,600 0 17,153 of location transfers, compensation for employees as well as Pending losses 15,844 0 0 15,844 costs of cancelling contract relationships. In 2010 a new Warranty obligations 9,430 2,458 0 11,888 restructuring provision was set up in accordance with IAS 37. Obligation on property sales 1,700 2,955 774 5,429 Restructuring 3,440 0 0 3,440 The provision for trademark and license fees still, as in the prior Trademark and year, relates to risks in connection with potential patent license fees 0 1,639 0 1,639 infringements. Miscellaneous 5,860 988 13 6,861 Total 61,895 16,274 1,357 79,526

The provision for pending losses relates moreover to a joint financing obligation. 30 IFRS 2 – Share-based Payment At December 31, 2010 the Jenoptik Group held share-based With the notice of an atypical silent shareholder of a property payment instruments in the form of virtual shares for both company in fiscal 2010, which is part of the plan assets, the active Executive Board members. risk exists for JENOPTIK AG that it will be subject to claims from a joint financing obligation granted. The virtual shares are measured as share-based remuneration instruments with cash compensation at their relevant fair values The provision for warranty obligations includes expenses for at the balance sheet date. The virtual shares will be paid out at specific as well as for general warranty cases. the end of their 4-year contractually fixed term. financial statements consolidated

Miscellaneous provisions include price audit risks amounting to In fiscal year 2010 the following effects in connection with the

TEUR 420 (2009 TEUR 433). Furthermore, they include provi- share-based payments impacted on the statement of compre- es ot sions for potential contract penalties and compensation claims. hensive income and the balance sheet: N

Miscellaneous provisions additionally relate to many recogniz- Statement of Group comprehensive income Balance sheet able specific risks and uncertain obligations which are accounted in TEUR 2010 2009 2010 2009 for at the probable amount required to settle them. Detailed Virtual shares – 482 – 140 622 140 information on these can be found in the management report under Note 5 Risk Report. The basis of measurement for determining fair value is the share price of JENOPTIK AG. In 2010 the Supervisory Board granted the Executive Board virtual shares with a total volume of 51,000 shares for the year 2009. The virtual shares allocated for the fiscal year 2009 were recorded at the balance sheet

date 2010 at their fair value of EUR 5.40 per virtual share and additional information recorded in provisions.

JENOPTIK 2010 161 Notes to the consolidated financial statements Notes to the balance sheet

On February 8, 2011 the personnel committee made a recom- 31 Financial liabilities mendation to the Supervisory Board that virtual shares with a Details of current and non-current financial liabilities can be total volume of 64,154 be allocated to the Executive Board seen in the following table: members as part of their variable remuneration for the fiscal Up to 1 – 5 More than year 2010. The Supervisory Board still has to decide on the final in TEUR 1 year years 5 years 31.12.2010 allocation. The virtual shares allocated for the fiscal year 2010 Bank liabilities 18,515 83,714 39,455 141,684 were measured at the balance sheet date 2010 at their fair (12,478) (113,893) (40,503) (166,874) value of EUR 5.40 per virtual share and recorded in provisions. Liabilities from finance leases 971 1,705 982 3,658 (1,054) (2,478) (1,344) (4,876) Development of the virtual shares of the Executive Board: Total 19,486 85,419 40,437 145,342 (13,532) (116,371) (41,847) (171,750) Dr. Michael Mertin Number 2010 Number 2009

1) 01.01. 30,000 0 (The amounts in brackets relate to the prior year) 42,222 2) Granted (provisional) 30,000 2) Paid out – – The current fiscal year was characterized by the further stabiliz- 31.12. 72,222 30,000 ing and improvement of the liquidity situation within the Group. After in 2009 borrowings were primarily converted to Frank Einhellinger Number 2010 Number 2009 long-term financing, in the fiscal year 2010 the financial liabili- 01.01. 21,000 1) 0 ties decreased and the cash balances increased and, thus net 21,932 2) Granted (provisional) 21,000 2) debt was reduced further. Paid out – – 31.12. 42,932 21,000 For the current financial liabilities from current account facilities, and the current portion of long-term loans amounting to 1) Remaining term 3 years 2) Remaining term 4 years TEUR 18,515, interest rates have been agreed ranging from 2.09 percent to 8.05 percent. The information disclosed in the table does not represent a cash remuneration but personnel expense in accordance with Non-current liabilities to banks include property loans of IFRS 2. With regard to all further information we refer to the TEUR 43,055 in addition to capital repayment loans and work- remuneration report in the management report on page 40. ing capital loans. Financial covenants have been determined for TEUR 72,125 of the non-current bank loans.

Of the bank liabilities disclosed in the balance sheet TEUR 43,105 (2009 TEUR 43,821) are secured by mortgages.

162 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Notes to the balance sheet Notes to the consolidated financial statements additional information

As at December 31, 2010 the Group has access to credit facili- The non-current accruals in the prior year included interim ties amounting to TEUR 88,129, of which TEUR 71,712 profits from a sale and lease back transaction amounting to remained unused and more than TEUR 12,000 had not yet TEUR 9,911. On notice being served by the silent shareholder been drawn upon. of the property company in the current fiscal year, the accrual was reversed. The liabilities from finance leases ofTEUR 3,658 represent the discounted payments for factory / office fixtures and fittings. Further information on derivatives can be found under Note 35 Financial Instruments. Detailed information regarding hedging of existing interest risks is given under Note 35. 33 Other current liabilities This item includes: 32 Other non-current liabilities Other non-current liabilities comprise: in TEUR 31.12.2010 31.12.2009 Trade accounts payable 31,632 38,541 in TEUR 31.12.2010 31.12.2009 Liabilities from on-account payments received 27,652 23,848 Cancellable financial instruments 9,568 9,007 Liabilities to non-consolidated Derivatives 471 12 affiliated companies 1,722 2,136 Other non-current liabilities 1,642 1,165 Liabilities to investment interests 596 3,271 Non-current accruals 0 9,932 Miscellaneous current liabilities 35,709 30,200 Total 11,681 20,116 Liabilities from construction contracts 0 6,634 Total 97,311 104,630

In previous years the Jenoptik Group had formed two property companies in the legal form of a GmbH & Co. KG, in which Liabilities from trade payables declined in the fiscal year by atypical silent shareholders held shares. The atypical sharehold- TEUR 6,909, on the other hand liabilities from on account pay- financial statements consolidated ers were granted extraordinary rights of notice at each of ments rose by TEUR 3,804. December 31, 2011 and at December 31, 2014. The property

companies were included fully in the consolidated financial As a result of the deconsolidation of the Jena-Optronik GmbH es ot statements in accordance with IAS 27 in connection with there are no non-current liabilities from construction contracts N SIC 12. For the Jenoptik Group the extraordinary right of notice (2009 TEUR 6,634) anymore. represents a conditional purchase price obligation which is Group accounted for at the present value of the expected compensa- Normal market interest rates have been agreed for liabilities to tion payments. Any necessary measurement adjustments to the non-consolidated affiliated and associated companies.L iabili- conditional purchase price obligations will be recorded against ties to investment interests include liabilities to joint ventures of equity without any impact on income. In accordance with TEUR 419 (2009 TEUR 3,132). expected utilization this item is presented in non-current or current liabilities. additional information

JENOPTIK 2010 163 Notes to the consolidated financial statements Notes to the balance sheet

Miscellaneous current liabilities comprise the following: 34 Group cash flow statement The cash and cash equivalents in the cash flow statement in TEUR 31.12.2010 31.12.2009 include liquid funds disclosed in the balance sheet amounting Cancellable financial instruments 11,388 0 to TEUR 65,335 (31.12.2009 TEUR 11,201). Cash and cash Liabilities to employees 7,769 6,402 equivalents are defined as cash balances and credit bank accounts Other liabilities from taxes 5,951 5,551 with a term of less than 3 months. Purchase price liabilities 2,175 6,175 Derivatives 982 907 The cash flow statement provides information on cash flows, Accruals 911 2,137 separately for cash flows from operating activities, from invest- Liabilities to employees' accident insurance 899 874 Other liabilities for social security 523 1,184 ing activities and from financing activities.C hanges in balance Finance interest liabilities from sheet items required in the development of the cash flow state- financial obligations 442 455 ment are not directly derivable from the balance sheet since Miscellaneous liabilities 4,669 6,515 effects of foreign currency exchange and changes in companies Total 35,709 30,200 consolidated are non-cash effective and are eliminated. Cash flow from operating activities is indirectly derived based on the In the current fiscal year the potential serviceable minority inter- earnings before tax. The earnings before tax are adjusted for est at the amount of the discounted present value of the prop- non-cash expenses and income. Cash flow from operating erty company LEUTRA SAALE Gewerbegrundstücksgesellschaft activities is calculated after accounting for changes in working mbH & Co KG, consolidated in accordance with IAS 27 in con- capital. The payments include the discontinued business divi- nection with SIC 12, was reclassified from non-current to cur- sion in accordance with IFRS 5 up to its deconsolidation on rent liabilities. The existing put option of the atypical silent November 30, 2010. shareholder cannot be exercised until 2011. Cash flow from operating activities fell by TEUR 9,546 to TEUR Liabilities to employees include holiday entitlements and flexi- 43,741 (31.12.2009 TEUR 53,287). This mainly resulted from a time credits. cash increase in working capital of TEUR 4,967 and the utilization of restructuring provisions in 2010 from the measures in The reduction in purchase price liabilities resulted from the pay- 2009. The discontinued business division generated an operat- ment of the purchase price for the acquisition of the remaining ing cash flow ofTEUR 2,172 (2009 TEUR 4,457). shares in JENOPTIK Laserdiode GmbH in the previous year. Cash flow from investing activities amounted toTEUR 30,309 The whole item of Financial Instruments is described in more (2009 minus TEUR 12,515) and is affected in particular by the detail in Note 35. sale of Jena-Optronik GmbH and the minority shares in caverion GmbH. This includes the discontinued business unit amounting to TEUR minus 794 (31.12.2009 TEUR minus 944).

164 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Other notes Notes to the consolidated financial statements additional information

The cash flow from financing activities amounted to minus Other notes TEUR 20,408 (2009 minus TEUR 41,966) and resulted mainly from the repayment of capital on bank loans. The payments 35 Financial instruments from changes in group financing include payments between non-consolidated companies, investments and payments to Risks atypical silent shareholders of property companies. Cash flow As part of its operating activities the Jenoptik Group is exposed from investing activities for the discontinued business division to credit risks, liquidity risks and market risks within the finan- amounts to TEUR minus 1,397 (2009 TEUR minus 3,512). cial area. Market risks relate principally to interest rate and exchange rate fluctuation risks. More information on the cash flow statement can be found under Note 2.3 Financial position in the Management Report. More detailed information on risk management and monitoring of risks is given in the Management Report under Note 5 Risk Report. Further information with regard to notes in capital management are included in the Management Report under Note 2.3 Financial position.

The following comments relate exclusively to the possible quantitive effects of the risks in the fiscal year.

The risks described above have an effect on the following financial assets and liabilities. The carrying values of the financial assets and liabilities represent their market values. Accord- ing to the fair value hierarchy under IFRS 7 prices relating to

identical assets or liabilities in active markets are allocated to financial statements consolidated level 1 quoted prices:

Market Market es values values ot

in TEUR 31.12.2010 31.12.2009 N Financial assets 188,617 139,959

Cash and cash equivalents 65,335 11,201 Group Financial assets available for sale 10,901 12,094 Receivables from finance leasing 2,453 2,579 Loans and receivables 107,692 108,534 Derivatives with hedging relationships 2,236 5,551 Financial liabilities 253,423 276,392 Trade accounts payable 31,632 38,541 Liabilities to banks and other financial obligations 141,684 166,874 Liabilities from finance leasing 3,658 4,876

Other non-derivative financial liabilities 74,996 65,182 additional information Derivatives with hedging relationships 1,453 919

JENOPTIK 2010 165 Notes to the consolidated financial statements Other notes

The following table shows the fair value hierarchies which Credit risks are mainly inherent in trade receivables. These are exist for the financial assets and liabilities that are measured at accounted for by setting up allowances. The Jenoptik Group is fair value: exposed marginally to default risks from other financial assets which primarily consist of cash and cash equivalents, loans and Market derivatives. The maximum risk of default is equal to the carry- values in TEUR 31.12.2010 Level 1 Level 2 Level 3 ing values of the financial assets at the balance sheet date of Financial assets TEUR 188,617 (2009 TEUR 139,959). The gross amount of Financial assets trade accounts receivable before allowances amounts to available for sale 10,901 10,901 0 0 TEUR 79,906 (2009 TEUR 78,339). The allowances accounted Derivatives with hedging relationships 2,236 2,236 0 0 for in the fiscal year and the ageing of receivables are both Financial liabilities described in Note 22. Derivatives with hedging relationships 1,453 1,453 0 0 The liquidity risk of the Group is that the Group is potentially unable to meet its financial commitments. This can, for exam- Level 1 represents fair values that are always available as ple, be due to inadequate availability of cash and cash equiva- quoted market prices. lents, capital repayment of financial liabilities, payment of suppliers and obligations from finance leasing. In order to The explanations of the changes in fair values are included guarantee liquidity and financial flexibility, credit lines and cash within the relevant comments to the balance sheet items. availability are planned using a 5-year financial plan and a rolling monthly 5-month liquidity forecast. The focus is still on The risk of credit or default is the risk that a customer or con- liquidity risk even one year after the financial crisis and is lim- tracting partner of the Jenoptik Group does not meet his con- ited by an effective cash and working capital management as tractual obligations. From this results the danger, on one hand, well as by credit facilities yet unused. In the fiscal year 2010 the that financial instruments suffer impairment related to credit- liquidity risk was further reduced by numerous measures and worthiness and, on the other hand, the danger of partial or full net debt was improved further. default of contractually agreed payments. The following overview shows the cash flows from the interest and capital repayments of financial liabilities:

Cash outflow in TEUR Carrying values Total Up to 1 year 1 – 5 years Over 5 years Variable interest bank liabilities 70,548 76,709 16,365 60,344 0 (79,374) (88,286) (10,759) (77,527) (0) Fixed interest bank liabilities 71,136 86,918 9,979 37,484 39,455 (87,500) (124,580) (11,441) (60,318) (52,821) Variable interest liabilities 3,658 3,658 971 1,705 982 from finance lease (4,876) (4,876) (1,054) (2,478) (1,344) Total 145,342 167,285 27,315 99,533 40,437 (171,750) (217,742) (23,254) (140,323) (54,165)

(The amounts in brackets relate to the prior year)

166 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Other notes Notes to the consolidated financial statements additional information

Cash outflows for variable-interest bank liabilities are based on JENOPTIK AG meets the risks with the following interest an interest rate of 4.3 percent (2009 4.0 percent). Fixed interest hedges. liabilities are charged interest at rates of between 4.0 percent Nominal volumes Market values and 8.0 percent. in TEUR 31.12.2010 31.12.2009 31.12.2010 31.12.2009 Interest cap 20,000 20,000 4 115 Further details are described under Note 31. In 2009 JENOPTIK AG concluded a financing package of JENOPTIK AG is primarily exposed to interest rate fluctuation medium and long-term loans of which TEUR 65,000 attract risks in the area of medium-term and long-term interest-bear- variable interest. For part of these loans JENOPTIK AG con- ing financial assets and liabilities due to fluctuations in market cluded an interest hedging instrument in 2009 in the form of interest rates. This risk is met by concluding hedging transac- an interest cap with the following parameters: tions depending on the market situation.

Interest cap TEUR 20,000 (2009 TEUR 20,000)

Carrying values Term March 31, 2009 to March 30, 2012 in TEUR 31.12.2010 31.12.2009 Maximum interest rate 2.45 % Interest-bearing financial assets 71,763 19,155 Reference interest rate 3-month Euribor of which variable interest 65,335 11,201 of which fixed interest 6,428 7,954 Under the interest cap liabilities of TEUR 20,000 are secured Interest-bearing financial liabilities 145,342 171,750 against the 3-month-Euribor rising above 2.45 percent for of which variable interest 74,206 84,250 three years. Since there is no highly effective hedging relation- of which fixed interest 71,136 87,500 ship to our loan financing the derivative is separately disclosed and measured. As at December 31, 2010 the market value of With a fluctuation in the market interest rate as atD ecember 31, the derivative amounts to TEUR 4 (2009 TEUR 115). The change

2010 over a range of 100 base points an opportunity loss or in market value is accounted for in income. financial statements consolidated gain of TEUR 64 (2009 TEUR 80) would result for the fixed- interest financial assets. Currency rate risks arise from the fluctuation in the financial

assets and liabilities denoted in foreign currency. es ot

For financial liabilities within the same range an opportunity N loss or gain of TEUR 711 (2009 TEUR 875) would result. In order to hedge currency risk forward exchange contracts are

used. In the fiscal year 2010 forward exchange contracts with a Group A change of 100 base points in the variable-interest financial nominal value of TEUR 42,920 were used in order to hedge and assets would have an impact of TEUR 653 (2009 TEUR 112) and document the underlying transactions as cash flow hedges. for variable-interest financial liabilities it would have an impact Also in the prior year only forward exchange contracts were of TEUR 742 (2009 TEUR 843). concluded and accounted for as cash flow hedges. Their total volume in the prior year amounted to TEUR 36,347. additional information

JENOPTIK 2010 167 Notes to the consolidated financial statements Other notes

These transactions relate to the exchange rate hedging of Foreign currency risks of TEUR 24,475 for a time frame of until major cash flows in foreign currency from the operating busi- the end of the year 2011 are hedged by forward exchange ness (in particular sales and materials purchases). contracts. Foreign currency risks of TEUR 18,445 for a time frame of until 2013 are hedged. The following positive market values arise from derivative financial instruments: Forward currency transactions are analyzed by currency sales and purchases as follows: in TEUR 31.12.2010 31.12.2009

Transactions to hedge against in TEUR 31.12.2010 31.12.2009 Currency risks from future cash flows Forward exchange contracts (Cash flow hedges): Forward exchange USD / EUR-sale 41,757 28,515 contracts, non-current 495 754 USD / EUR-purchase 356 403 Currency risks from future cash flows (Cash flow hedges): orwardF exchange GBP / EUR-sale 578 6,309 contracts, current 1,737 4,797 GBP / EUR-purchase 0 801 Interest cap 4 115 CAD / EUR-sale 229 319 Total 2,236 5,666 The underlying transactions mainly relate to the sales of prod- The following negative market values arise from derivative ucts. The risk hedged is always the currency risk. financial instruments: Since these are for the purpose of hedging cash flow and are in TEUR 31.12.2010 31.12.2009 assessed as effective, the change in fair value is accounted for Transactions to hedge against in equity. Currency risks from future cash flows (Cash flow hedges): orwardF exchange contracts, non-current 471 12 The main foreign currency transactions within the Jenoptik Currency risks from future cash flows Group relate to the US Dollar. (Cash flow hedges): orwardF exchange contracts, current 982 907 Total 1,453 919 Consistent management of foreign currency resulted in underlying transactions being almost completely hedged and the risk The market values shown above were calculated and confirmed position declining again. by the banks. The table shows the net foreign currency risk position in USD: Net gains arose from income on release of allowances amounting to TEUR 535 (2009 TEUR 1,127). In the current fiscal year in TUSD 31.12.2010 31.12.2009 Financial assets 17,426 16,975 net losses for financial instruments amounting to TEUR 3,166 Financial liabilities 1,788 2,288 were realized. Foreign currency risk from balance sheet items 15,638 14,687 Foreign currency risk from pending transactions 40,828 21,111 Transaction-related foreign currency item 56,466 35,798 Items hedged economically by derivatives 54,114 35,320 Net position 2,352 478

168 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Other notes Notes to the consolidated financial statements additional information

A sensitivity analysis relative to the US Dollar led to the Guarantees for Jena-Optronik GmbH sold at the end of 2010 following result: amounted as at December 31, 2010 still to TEUR 870 and are cross-guaranteed in full to JENOPTIK AG by the new owner of A change in the US Dollar exchange rate as at the balance Jena-Optronik GmbH. sheet date of 5 percent would have a positive or negative impact of TEUR 88 and a change of 10 percent a positive or There are no longer any guarantees as at December 31, 2010 negative impact of TEUR 178 on the statement of comprehen- (2009 TEUR 250) for M + W Zander Group. sive income. 37 Other financial commitments 36 Commitments and contingent liabilities Financial commitments from rental and leasing contracts are Compared to the prior year the volume of guarantees has described in Note 16. decreased significantly as expected and only amounted to TEUR 12,390 as at December 31, 2010 (2009 TEUR 103,664), In addition to order commitments for tangible assets there are whereby 70 percent are secured by cross-guarantees. further order commitments amounting to TEUR 38,093 (2009 TEUR 24,120). in TEUR 31.12.2010 31.12.2009 Guarantees and line for caverion GmbH 4,058 94,990 38 Legal disputes Other companies 8,332 8,424 JENOPTIK AG and its Group companies are involved in several M + W Zander Group 0 250 court or arbitration cases. Liabilities from guarantees 12,390 103,664 For more information on pending legal disputes which may The guaranteed still existing as at December 31, 2010 for the have significant influence on the economic position of the company sold, caverion GmbH, amounting to TEUR 4,058 Group, we refer to the section “Legal Risks” in the Group Man-

(2009 TEUR 94,990), have been cross-guaranteed to JENOPTIK AG agement Report on page 101. financial statements consolidated by the new owner of caverion GmbH. Furthermore, there is no longer a financial commitment for surety lines (2009 For any potential charges from court or arbitration cases ade-

TEUR 130,000). Thus, there is no longer a risk for JENOPTIK AG quate provisions have been accounted for in the relevant es ot from the adoption of guarantees for caverion GmbH. Group company for litigation risks and litigation costs where N these are for events before the balance sheet date and the

The largest item of guarantees consisted of the warranty guar- probability of an outflow of economic resources is estimated by Group antees for other companies in connection with the Clinic 2000 the legal representatives of the company as being higher than Jena amounting to TEUR 5,500 (2009 TEUR 5,500), the partial 50 percent. Adequate insurance coverage exists. release from liability of which is still outstanding by the Free State of Thuringia. Potential claims from guarantees of only 39 Post balance sheet events TEUR 481 (2009 TEUR 527) exist with regard to Jenoptik. The Executive Board authorized the financial statements on March 10, 2011 for approval by the Supervisory Board. There The loan security granted to OLPE Jena GmbH, Jena was were no events of significant importance ocurring after the extended at the amount of TEUR 600 (2009 TEUR 1,000) and balance sheet date of December 31, 2010. will continue to be reduced gradually. additional information

JENOPTIK 2010 169 Notes to the consolidated financial statements Other notes

40 Related party disclosures according Furthermore, there are guarantees to related companies to IAS 24 amounting to TEUR 6,862 of which TEUR 3,037 is secured Related parties are defined inIAS 24 “Related Party Disclosures” through cross-guarantees. as entities or people which / who control or are controlled by the Jenoptik Group to the extent that these are not already Members of the Executive Board and Supervisory Board of included in the consolidated financial statements as consoli- JENOPTIK AG are members in Supervisory Boards and in Execu- dated companies. Control exists if a shareholder holds more tive Boards in other companies with which Jenoptik has rela- than half of the voting rights in JENOPTIK AG or, on the basis of tionships as part of its normal operating activities. All transac- the constitutional conditions or contractual agreement, has the tions with these companies are conducted under conditions possibility to direct the financial and business policies of the which are normal between unrelated parties. management of the Jenoptik Group. Detailed information on the Executive Board and Supervisory Currently, in accordance with the announcement in line with Board is set out in the section on Executive Board and Supervi- § 21 WpHG (Securities Trading Act) ECE Industriebeteiligungen sory Board. GmbH, Austria holds 25.02 percent in the Jenoptik Group. The other shares are held in free float. In the fiscal year there are no trade or other relationships with ECE European City Estates GmbH.

Analysis of the relationships to related parties in the fiscal year 2010:

of which with Non-consolidated in TEUR Total companies Joint ventures Sales 6,877 6,869 8 Purchased services 4,253 2,413 1,840 Receivables from operations 4,286 4,119 167 Liabilities from operations 778 705 73 Loans 1,726 726 1,000

The purchased services from associated companies amounting to TEUR 1,840 include research and development services of TEUR 1,508.

170 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Obligatory and supplementary disclosures under HGB Notes to the consolidated financial statements additional information

Obligatory and supplementary disclosures Supplementary disclosures under § 314 HGB under HGB Number of employees Obligatory disclosures under § 315a HGB and The average number of employees is analyzed as follows: § 264 (3) or § 264b HGB The consolidated financial statements ofJ ENOPTIK AG have 2010 2009 been prepared in accordance with § 315a HGB in line with the Employees 2,928 3,206 rules of the IASB with an exemption from preparation of con- Trainees 120 127 solidated financial statements underHG B. At the same time the Total 3,048 3,333 consolidated financial statements and Group management report are in line with the European Union Directive on Consoli- An average of 34 (2009 35) employees were employed in pro- dated Accounting (83 / 349 / EWG), whereby this directive has portionally consolidated companies in 2010. been interpreted accordingly in compliance with Standard No. 1 (GAS 1) “Exempt Consolidated Financial Statements Cost of materials and personnel expenses under § 315a HGB” issued by the German Accounting Stan- in TEUR 2010 2009 dards Committee (GASC). In order to achieve comparability Cost of materials with consolidated financial statements prepared in accordance Raw materials, consumables, supplies with the German Commercial Code all disclosures and informa- and purchased merchandise 163,368 157,164 tion required by HGB, and which are in addition to the obliga- Cost of purchased services 60,811 49,446 tory disclosures necessary for IFRS, are published. Total 224,179 206,610

Due to their inclusion in the consolidated financial statements Personnel expenses Wages and salaries 158,115 158,274 of JENOPTIK AG the following fully consolidated affiliated Ger- Social security and pension costs 28,148 29,035 man companies have utilized the simplifications of § 264 (3) or financial statements consolidated Total 186,263 187,309 § 264b HGB:

• SAALEAUE Immobilien Verwaltungsgesellschaft mbH & Co. es ot

Vermietungs KG, Jena N • LEUTRA SAALE Gewerbegrundstücksgesellschaft mbH & Co.

Vermietungs KG, Jena Group • JENOPTIK Robot GmbH, Monheim am Rhein • HOMMEL Etamic GmbH, Villingen-Schwenningen • JENOPTIK Automatisierungstechnik GmbH, Jena • ESW GmbH, Wedel • JENOPTIK Optical Systems GmbH, Jena • JENOPTIK Diode Lab GmbH, Berlin • JENOPTIK Laser GmbH, Jena • Lechmotoren GmbH, Altenstadt

• JENOPTIK Polymer Systems GmbH, Triptis additional information • JENOPTIK SSC GmbH, Jena • JORENT Techno GmbH, Jena • Innovavent GmbH, Göttingen

JENOPTIK 2010 171 Notes to the consolidated financial statements German Corporate Governance Code / Executive Board

German Corporate Governance Codex

On December 9, 2010 the Executive and Supervisory Boards of JENOPTIK AG submitted the statement on conformity with the recommendations of the government commission on the German Corporate Governance Code in the version dated May 26, 2010 in accordance with § 161 AktG (German Public Companies Act). The statement is made permanently available to the shareholders on the Internet page of JENOPTIK AG under www.jenoptik.com / Investors / Corporate Governance. The statement is also viewable in the business office of JENOPTIK AG (Carl-Zeiß-Straße 1, 07743 Jena) .

Executive Board

The following gentlemen were appointed members to the Executive Board during the fiscal year 2010:

Additional appointments at: Dr. Michael Mertin Chairman of the Executive Board of JENOPTIK AG CoOptics GmbH (SB member) Frank Einhellinger Member of the Executive Board of JENOPTIK AG None

Remuneration and benefits of the active members of the Exec- utive Board of JENOPTIK AG in 2010 are expected to amount to TEUR 1,676 without other services and LTI programme.

Remuneration for 2010 in TEUR Fixed Variable (without LTI)1) Total Dr. Michael Mertin (Chairman of the Executive Board) 490 610 1,100 Frank Einhellinger (Member of the Executive Board) 320 256 576 Total 810 866 1,676

1) LTI = Long-term incentive component

172 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Executive Board Notes to the consolidated financial statements additional information

The fixed remuneration of theE xecutive Board members share in XETRA trading (or a comparable subsequent system) on has been paid at the above amounts to Dr. Mertin since Janu- the Frankfurt Stock Exchange. The subsequent year is the calen- ary 1, 2009 and to Mr Einhelliger since July 1, 2009. From dar year that follows the year in which the target agreement January 1, 2011 fixed emunerationr is increased by TEUR 20 for was concluded. This means, for the case of granting of virtual Dr. Mertin and by TEUR 13 for Mr. Einhellinger. shares as part of the target agreement for the year 2010, that the allocation of the virtual shares as part of the determination According to the Executive Board service contracts changed in of the target achievement will be in the year 2011 and the pay- the fiscal year 2010, the variable amount of remuneration is ment of the cash value of the virtual shares – the amount of dependent on the achievement of objectives in accordance which is calculated on the basis of the average price of the with a target agreement concluded between JENOPTIK AG, share in 2014, will be at the beginning of the year 2015. After represented by the Supervisory Board, and the relevant Execu- agreement with the Personnel Committee the allocation for the tive Board member. The target agreement is to be based on fiscal year 2010, subject to approval by the Supervisory Board, permanent corporate development. is to amount to 42,222 virtual shares for Dr. Mertin and 21,932 virtual shares for Mr. Einhellinger. The assessment bases for this are the Group EBIT, operating cash flow, the consolidated financial statements, capital market Supplementary benefits for Dr. Mertin amount to TEUR 44.5 and share-relevant, as well as strategic and operating targets (2009 TEUR 42.5), for Mr. Einhellinger TEUR 22.7 (2009 TEUR for the appropriate year as well as of a long-term nature and 22.8). In addition to a company car, supplementary benefits an individual assessment of performance, each linked to caps include the adoption of the costs of professional indemnity for targets not being met or being exceeded. Additionally, for insurance as well as of accidence insurance. the total of the individual targets, to which the variable remuneration is linked, there is an overall cap. The actual level of the In 2007 contracts for company pension schemes were con- variable remuneration depends on the achievement of the cluded with both Board members. The pension commitment is objectives in accordance with the target agreement. based on a pension fund reinsured by a life insurance. It is a financial statements consolidated defined contribution pension as part of a benevolent fund. The target computation for variable remuneration in 2010 is In 2010 the expense for the benevolent fund amounted to

performed retrospectively. This is agreed in advance with the TEUR 240 for Dr. Mertin and TEUR 66 for Mr. Einhellinger. es ot

Personnel Committee, however still requires approval by the full N Supervisory Board and is, thus, not yet final. The shares privately purchased by the members of the Execu-

tive Board amounted to 1,036 at the year end and are held by Group One part of the variable remuneration is in the form of virtual Mr. Frank Einhellinger. Dr. Michael Mertin does not hold any shares based on the Long-Term Incentive Component (LTI) shares in JENOPTIK AG. which has existed since 2009 and was newly structured in 2010 according to the legal specifications of theA ct on the Pension payments amounting to TEUR 293 were made to for- Appropriateness of Management Board Compensation. mer Executive Board members. Pension provision (defined benefit obligation) for formerE xecutive Board members amounted The allocation of the virtual shares is conducted as part of the to TEUR 3,668 as at the balance sheet date December 31, 2010. determination of achievement of targets. A payment is not The interest cost recorded in 2010 for these existing provisions made, however, until the end of the fourth subsequent year amounted to TEUR 207. additional information after allocation on the basis of the average closing price of the

JENOPTIK 2010 173 Notes to the consolidated financial statements Supervisory Board

Supervisory Board The following ladies and gentlemen were appointed members to the Supervisory Board during the fiscal year 2010

Additional appointments at:

Rudolf Humer • Baumax AG, Austria (Ccb member) Entrepreneur • Baumax Anteilsverwaltung AG, Austria (Ccb member) • Ühinenud Farmid AS, Estonia (Ccb Chair) Member of: Personnel Committee (Chairman) Mediation Committee (Chairman) Nomination Committee (Chairman)

Wolfgang Kehr 1) None Trade Union secretary at IG Metall, Bezirk Frankfurt / Main Member of: Personnel Committee Mediation Committee

Michael Ebenau 1) None Second authorized representative of IG Metall Jena-Saalfeld and second authorized representative of IG Metall Gera Member of: Audit Committee Personnel Committee (from 9.12.2010) Mediation Committee (from 9.12.2010)

Markus Embert 1) None Dipl.-Ing. in electrical engineering at ESW GmbH Member of: Capital Market Committee

Christian Humer • Ühinenud Farmid AS, Estonia (Ccb member) Chairman of the Executive Board of ECE European City Estates GmbH, Austria Member of: Personnel Committee Nomination Committee

Thomas Klippstein 1) None Chairman of Group Works’ Council of Jenoptik Member of: Personnel Committee Audit Committee

Christel Knobloch 1) None Process coordinator at JENOPTIK Automatisierungstechnik GmbH (from 6.12.2010) Member of: Capital Market Committee (from 9.12.2010)

Abbreviations: SB – Supervisory Board Ccb. – Comparable controlling body ig – Internal group appointment Dep. – Deputy 1) Employee representative

174 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Supervisory Board Notes to the consolidated financial statements additional information

Additional appointments at:

Anita Knop 1) None Dipl.-Ing. Information Technology at Jena-Optronik GmbH (until 3.12.2010) Member of: Capital Market Committee

Dieter Kröhn 1) None Production planner of ESW GmbH (from 3.12.2010) Member of: Capital Market Committee (from 9.12.2010)

Dr. Lothar Meyer • UniCredit Bank AG (SB member) Former Chairman of the Executive Board • ERGO Versicherungsgruppe AG (SB member) ERGO Versicherungsgruppe AG Member of: Audit Committee Capital Market Committee (Chairman)

Günther ReiSSmann 1) None Chairman of the Group Works’ Council of Jenoptik (until 10.6.2010), Chairman of Works‘ Council of JENOPTIK AG (until 30.11.2010) Member of: Personnel Committee Mediation Committee Capital Market Committee consolidated financial statements consolidated Heinrich Reimitz • Ühinenud Farmid AS, Estonia (Ccb member) Member of the Executive Board of ECE European City Estates GmbH, Austria

Member of: Audit Committee (Chairman) es ot

Capital Market Committee N

Prof. Dr. rer. nat. habil., Dipl.-Physiker • BioCentive GmbH (SB Chair) Group Andreas Tünnermann • CoOptics GmbH (SB member) Director of the Institute for Applied Physics and Professor for Applied Physics at the Friedrich-Schiller-University and Head of the Fraunhofer Institute for Applied Optics and Fine Mechanics, Jena Member of: Personnel Committee Mediation Committee Nomination Committee

Gabriele Wahl-Multerer None Dipl.-Kauffrau, entrepreneur Member of: Capital Market Committee additional information

Abbreviations: SB – Supervisory Board Ccb. – Comparable controlling body ig – Internal group appointment Dep. – Deputy 1) Employee representative

JENOPTIK 2010 175 Notes to the consolidated financial statements Supervisory Board

The remuneration of the Supervisory Board consists of a fixed Supervisory Board members who have only belonged to the and a profit-related component and is set out in § 19 of the Supervisory Board or a committee for part of the fiscal year articles of association of JENOPTIK AG newly drawn up under receive time-apportioned remuneration. Annual General Meeting resolution dated June 9, 2010. This remuneration rule sets out, as part of total remuneration, a For participation at a meeting, members of the Supervisory fixed annual payment of TEUR 15. The Chairman of the Super- Board also receive an attendance fee of TEUR 0.6. Expenses of visory Board receives twice this amount and the Deputy Chair a member of the Supervisory Board in connection with the one and a half times this amount. Additionally, each member exercise of his office are reimbursed against evidence in accor- of a committee receives remuneration of TEUR 5. The commit- dance with the generally applicable legal provisions for this; to tee chairman receives twice this amount. The fixed emunera-r the extent that these are in direct connection with attendance tion is payable at the end of the fiscal year. of a Supervisory Board or committee meeting. However this only applies if they exceed the amount of TEUR 0.6. In addition, each Supervisory Board member receives an annual, profit-related payment amounting toTEUR 7.5, to the JENOPTIK AG additionally reimburses Supervisory Board mem- extent that the Group earnings before tax exceed the value of bers any value added tax incurred on their remuneration. 10 percent of Group equity at the end of the fiscal year. The annual profit-related remuneration increases toTEUR 15 to the In the fiscal year 2010 TEUR 342 was provided for the fixed extent that the Group earnings before tax exceed 15 percent of remuneration of the Supervisory Board and TEUR 101 for vari- Group equity. The Chairman of the Supervisory Board receives able remuneration. Jenoptik has not paid any other fees or twice this amount and the Deputy Chair one and a half times benefits for personally provided services (in particular consult- this amount. The approved consolidated financial statements ing and agency services) to the members of the Supervisory form the basis for determining the earnings before tax and Board. equity. The annual profit-related remuneration shall be paid after the ordinary Annual General Meeting which decides on At the end of the fiscal year 2010 total shares or elatedr finan- approval of Supervisory Board actions for the past fiscal year, cial instruments held directly or indirectly by all Supervisory i. e., usually after the Annual General Meeting of the following Board members amounted to 3,729,473. These include fiscal year. Since the Group earnings before tax for 2009 did 2,773,066 shares held by Ms. Wahl-Multerer as sole sharehold- not reach the above-mentioned value, in 2010 no profit-related ers of ZOOM Immobilien GmbH (as legal successor of VARIS remuneration was paid for the fiscal year 2009. Vermögensverwaltungs GmbH) and 675,000 shares held directly and indirectly by Mr. Rudolf Humer.

176 JENOPTIK 2010 INFORMATION for the shareholders Group management report consolidated financial statements Responsibility statement by management Notes to the consolidated financial statements additional information

In accordance with this remuneration system members of the Supervisory Board received the following total remuneration payments in the fiscal year 2010: of which Total Fixed annual Attendance in TEUR remuneration remuneration 2009 fees 2010 Value added tax 1) Rudolf Humer (Chairman) 44.8 40.0 4.8 0.0 Wolfgang Kehr (Dep. Chairman until 31.12.2010) 38.4 32.7 5.7 6.1 Michael Ebenau (Dep. Chairman from 1.1.2011) 29.5 23.8 5.7 4.7 Markus Embert 26.7 23.8 2.9 4.3 Christian Humer 24.8 20.0 4.8 0.0 Thomas Klippstein 37.6 29.7 7.9 6.0 Christel Knobloch (since 6.12.2010) 0.6 0.0 0.6 0.0 Anita Knop (until 3.12.2010) 26.7 23.8 2.9 4.3 Dieter Kröhn (since 3.12.2010) 0.6 0.0 0.6 0.0 Dr. Lothar Meyer 41.4 35.7 5.7 6.6 Günther Reißmann (until 30.11.2010) 34.7 29.7 5.0 5.5 Heinrich Reimitz 35.4 30.0 5.4 0.0 Prof. Dr. rer. nat. habil. Andreas Tünnermann 28.8 23.8 5.0 4.6 Gabriele Wahl-Multerer 26.7 23.8 2.9 4.3 Total 396.7 336.8 59.9 46.4

1) Included in fixed remuneration and attendance fees; the gentlemen Rudolf and Christian Humer and Mr. Heinrich Reimitz have a limited tax liability in Germany due to their place of residence being abroad and thus no value added tax was incurred on their remuneration but rather withholding tax in accordance with § 50 a (1) N0. 4 EStG (Income Taxes Act) was paid on the fixed remuneration. consolidated financial statements consolidated

Responsibility statement by management es ot

To the best of our knowledge, and in accordance with the fair review of the development and performance of the busi- N applicable reporting principles for financial reporting, the con- ness and the position of the Group, together with a description solidated financial statements give a true and fair view of the of the principal opportunities and risks associated with the Group assets, liabilities, financial position and profit or loss of the expected development of the Group for the remaining months Group, and the Management Report of the Group includes a of the fiscal year.

Jena, March 10, 2011

Michael Mertin Frank Einhellinger additional information Chairman of the Executive Board Executive Board Member

JENOPTIK 2010 177 auditors’ report auditors’ report

We have audited the consolidated financial statements pre- report are examined primarily on a test basis within the pared by JENOPTIK Aktiengesellschaft, Jena, comprising framework of the audit. The audit includes assessing the the consolidated statement of comprehensive income, the annual financial statements of those entities included in balance sheet, statement of changes in equity, cash flow consolidation, the determination of entities to be included statement and the notes to the consolidated financial state- in consolidation, the accounting and consolidation princi- ments, together with the group management report for the ples used and significant estimates made by management, as business year from January 1 to December 31, 2009. The well as evaluating the overall presentation of the consoli- preparation of the consolidated financial statements and the dated financial statements and group management report. group management report in accordance with IFRS, as We believe that our audit provides a reasonable basis for adopted by the EU, and the additional requirements of Ger- our opinion. man commercial law pursuant to § 315a Abs. 1 HGB (and supplementary provisions of the shareholder agree- Our audit has not led to any reservations. ment / articles of incorporation) are the responsibility of the parent company’s management. Our responsibility is to In our opinion, based on the findings of our audit, the con- express an opinion on the consolidated financial statements solidated financial statements comply withIFRS , as and on the group management report based on our audit. adopted by the EU, the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB (and sup- We conducted our audit of the consolidated financial plementary provisions of the shareholder agreement / arti- statements in accordance with § 317 HGB [Handelsgesetz- cles of incorporation) and give a true and fair view of the buch “German Commercial Code”] and German generally net assets, financial position and results of operations of the accepted standards for the audit of financial statements Group in accordance with these requirements. The group promulgated by the Institut der Wirtschaftsprüfer (IDW). management report is consistent with the consolidated Those standards require that we plan and perform the audit financialstatements and as a whole provides a suitable view such that misstatements materially affecting the presenta- of the Group’s position and suitably presents the opportu- tion of the net assets, financial position and results of oper- nities and risks of future development. ations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and Berlin, March 10, 2011 the economic and legal environment of the Group and expectations as to possible misstatements are taken into KPMG Ag account in the determination of audit procedures. The Wirtschaftsprüfungsgesellschaft effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the con- Dr. KRONNER Neumann solidated financial statements and the group management Auditor Auditor

178 JENOPTIK 2010 additional information additional 184 182 E 181 180

I S f m inancial inancial c x e i p e c r n int utiv tific tific e

A g mana d l ossary visory visory g e m C e n o t board t uncil N o t e s to th to e

consolidat consolidat I NFORMATION mana Grou additional information additional 2010 i o JE e e N d d

financial stat financial stat financial p for th for P

T K e g

shar e m e n e t r t h e e old m m e p e e 179 o n n e r rt ts ts s

additional information Group Notes consolidated financial statements additional information Executive Management Board

Ex ecutive Management Board (as at January 2011)

D.M r ichael Mertin Wilh elm Hardich Chairman of the Executive Board Head of Defense & Civil Systems division

F rank Einhellinger Me lanie Jaklin Member of the Executive Board Head of HR , Supply Chain Management & Shared Service Center

Be rnhard Dohmann D.r r i k Michael Rothweiler H ead of Traffic Solutions division Head of Optical Systems division

D.T r homas Fehn VOL KMar HAUSER Head of Lasers & Material Processing division Head of Industrial Metrology division

180 JEOI N PT K 2010 INFORMATION for the shareholders Grou p management report consolidated financial statements Notes to the consolidated financial statements ScientificA dvisory Council additional information

Si c entific Advisory Council (as at January 2011)

D.M r ichael Mertin Prof.D. r rer. nat. Jürgen Popp JEOI N PT K AG, Jena, Chairman ITPH Institut für Photonische Technologien e.V., Jena

Prof.D.H r artmut Bartelt Prof.D.R r oland Sauerbrey ITPH Institut für Photonische Technologien e.V., Jena Forschungszentrum Rossendorf, Dresden

Prof.D. r Karlheinz Brandenburg Prof.D.M r ichael Schenk Technische Universität Ilmenau, IFF Fraunhofer Institut für Fabrikbetrieb und -automatisierung, Magdeburg Fakultät Elektrotechnik / Institut für Medientechnik

Prof.D.H r artwig Steffenhagen Prof.D. r Gerhard Fettweis Rheinisch-Westfälische Technische Hochschule (HRWT ), Aachen Technische Universität Dresden, Fakultät für Elektrotechnik, Mannesmann Mobilfunk Stiftungslehrstuhl Prof.D. r Günther Tränkle F erdinand-Braun-Institut, Leibniz-Institut für Höchstfrequenztechnik, Berlin

Prof.D. r Johann Löhn ts

Steinbeis-Hochschule Berlin n Prof.D.A r ndreas Tünnermann e m IOF Fraunhofer Institut für angewandte Optik und Feinmechanik, Jena e

Prof.D. r rer. nat. habil. Jürgen Petzold Technische Universität Ilmenau, Prof.D. r bErnd Wilhelmi Fakultät für Elektrotechnik und Informationstechnik, financial stat d

Jena e Institut für Elektrische Energiewandlungen und Automatisierung consolidat s e t o N

p Grou additional information

JEOI N PT K 2010 181 additional information Financial glossary

F inancial glossary A – Z

A Ca sh flow: A corporate analysis figure that sheds D eferred taxes: Temporary tax expense differ- light on the earnings and financial strength of the ences between individual or consolidated group Accru als: Balance sheet liabilities that include company which indicates the amount of liquid funds accounts in accordance with commercial law and future payments and reductions in value as expenses the company has at its disposal within a specific pe- tax returns. This figure is a measure of the relation- for the accounting period. The exact amount and / riod of time as a result of its economic turnover. ship between company results and tax expenses. or time of payment for these items are not yet determined by the balance sheet date, but their occur- C ommercial papers: Money market papers with D epreciation: Capital expenditure is subject to de- rence is quite certain. a term of between 7 and 270 days. They are placed preciation throughout its entire useful life, with the on the money market mostly by companies with a purchase price being amortized over a period of time. Accru als and deferrals: Payments made or very good credit rating. The terms of these debt in- received during the accounting period, but which struments can be determined flexibly to meet the D erivatives: Derivatives are derived financial in- refer to a period after the balance date. needs of the companies. Interest payments proceed struments dependent on the price development through the calculation of a loan discount. of the underlying assets (e. g. shares, interest rates, Affili ated companies: JEOI N PT K AG and all its currencies, or goods). The basic forms are futures subsidiaries, whether or not they are included in the C onsolidation: The incorporation of partial and options. consolidated financial statements. accounts into a total account, such as the incorporation of the individual balance sheets of group dis agio: The difference between the amount of a Asset ratio: Figure used in the analysis of the companies into a group balance sheet. loan to be repaid and the amount received when the asset structure which describes the ratio of non-cur- loan was granted. rent assets to total assets. C onsolidation of assets and liabilities: Adjustments necessary in consolidated financial D isinvestment: The effect of depreciation sur- Associ ated companies: Companies not com- statements that offset all group-internal receivables passing replacement investment (e. g. to maintain pletely or majority owned by the parent company, and payables – not only the positions included in production machinery). but upon which the parent company exercises sig the balance sheet. nificant influence (with an ownership interest of D ue diligence: Due diligence is the intensive in- more than 20 percent). C onsolidation of equity: Equity relationships vestigation and evaluation by external experts of between companies within a group are consolidated the financial, legal and commercial situation of a At-equity evaluation: The evaluation of an as a part of the overall consolidation process. This company including risks and prospects. This analysis interest in an affiliated company reflecting the com- entails offsetting the book value of the investment in is a prerequisite in, e. g., the preparation process for pany’s shareholders’ equity and annual earnings the subsidiary against the shareholders’ equity of the IPOs, the acquisition or sale of companies or com proportionate to the interest held. subsidiary. pany segments, the granting of credits and for capital increases. B C onsolidation of income and expenses: Only expenses and income arising from transactions E Book-to-bill ratio: Order intake to sales for with third parties outside the group may be includ a fiscal year. A ratio of over 1.00 indicates that order ed in the consolidated income statement. Therefore ETBI : Earnings before interest and taxes. intake surpassed sales for the fiscal year, likely lead- income and expense items which arise from the ing to an increase in order backlog. This is usually also group-internal supply of goods and services need to E : BItdA Earnings before interest, taxes, deprecia- a good indicator of a future rise in sales. be offset against each other in the consolidated tion and amortization. financial statements. Borrowed capital: Capital that a company re- E limination of group-internal profits ceives as a credit to finance fixed and current assets. C onsolidated companies: Companies includ and losses: For the purposes of the consolidation ed in a group’s consolidated financial statement. process, group-internal profits and losses arising C from the delivery of goods or services between group C orporate governance (code): This code companies are not considered valid until the asset Ca.: p In a contractual agreement of this sort, the pur determines the guidelines for the transparent in question departs from the group. The elimination chaser pays for a guaranteed interest rate cap for management and supervision of a company. The of group-internal profits and losses is made possible an agreed period of time. If the market interest rate recommendations of the Corporate Governance through the evaluation of deliveries and services rises above the cap on the specified interest deter Code provide for transparency and increase trust in according to uniform group acquisition and produc- mination dates for the next interest period, the cap responsible management. The recommendations tion costs. seller must pay the difference. protect the shareholders in particular. F Ca pital expenditure: Expenditure on items re- D quired for production purposes over a period of F ree cash flow: The free cash flow is the cash more than a year, such as buildings, machinery and D: ebt This includes all long-term and short-term inflow available. The amount of the free cash flow computer programs. Capital expenditure is subject terest-bearing third-party capital, including bonds, is regarded by financing institutions as an indicator to depreciation throughout its useful life. participatory capital, bank loans and loans from so- for the ability to repay credits and is therefore often cial welfare funds. used as basis to calculate the financing capacity.

182 JEOI N PT K 2010 INFORMATION for the shareholders Grou p management report consolidated financial statements Notes to the consolidated financial statements Financial glossary additional information

The free cash flow is calculated taking the cash flow P T from operating activities (before income taxes and interests) less investments from operating activities P ercentage-of-completion method: Te r asuring: Management of finances – a major plus disinvestments. A procedure in accordance with IAS 11, which com- task of the corporate finance area. The aim of putes sales revenue, order costs, and order results Treasuring and its control instruments is to optimize F ree float: Scattered company shares held by a deriving from partial payments on a long-term cus- liquidity and profitability of the company. large number of different investors. tomer-specific contract or similar services in accord ance with the degree to which the project is com- V Fn i ancial liabilities: These include all current pleted. This method is also valid when the order has and non-current interest-bearing external finances, not yet been fully completed although the customer Va lue added: The growth in value that is created e. g. bonds, bank liabilities, and leasing liabilities. has paid the invoice. through company operations, in addition to goods and services purchased from outside the company. G P repaid and deferred expenses: Payments Value added is then distributed as labor costs, taxes, which are made or received in advance in the period interest, profits and dividends. G oodwill: The purchase price of a newly acquired under report but concern a period after the balance company minus its shareholders’ equity (assets minus sheet date. W liabilities). Po r jected-unit-credit method: A method W orking Capital: Sum of inventories and re- H used to evaluate pension obligations in accordance ceivables from operating activities less trade ac- with IAS 19, which includes the expected future in- counts payable, PoC (percentage of completion) lia- H edging: Through hedging, existing securities can crease of salaries and pensions in addition to the bilities and on-account payments received. be protected against negative price trends though the pension benefits secured before the cut-off date. purchase or sale of derivatives (futures, options, swaps).

P urchase price allocation: The method of ts n dividing the purchase price of a newly acquired com- e

I m pany among its assets and liabilities. e IFRS I( / AS International Financial R eporting Standards): These internationally R valid accounting standards ensure the comparability

of consolidated financial statements and, through R eturn on sales: Earnings after tax divided financial stat d their particular transparency, satisfy the information by sales. e requirements. The sections of the IFRS are known as the IAS (International Accounting Standards), while R eturn on equity: Ratio of earnings after tax the newer sections are referred to as IFRS. and capital employed. consolidat

J r + d ratio: R D+ expenditure as a percentage of sales. Joint Venture: Economic cooperation between s companies, usually limited in time and scope which R evenue reserves: Reserves that are accumu e t is run by the partner companies together. lated from undistributed profits. o N

p M S Grou

Ma rket capitalization: Number of shares S hareholders’ equity: The capital contributed multiplied by share price. by a company’s owners (shareholders) that is gradually accumulated within the company in the form of M inority interests: Interests in Jenoptik reserves. It is available for use by the company in the Group companies that are not majority-owned by long term. JEOIA N PT K G or the group companies. They are included in the earnings and net assets of the sub- sh areholders’ Equity ratio: Ratio used in sidiary company. capital structure analysis depicting the ratio of the shareholders’ equity in the total capital (sharehold- O ers’ equity divided by the balance sheet total).

O ption: The right to purchase (call option) or sell S: wap An agreement between two companies to (put option) the underlying of an option (e. g. securi- exchange cash flows. In the case of an interest ties or currencies) at a previously agreed price (exercise swap, fixed interest payments are swapped for float- additional information price) at a specific time or within a specific period of ing payments for a nominal fee. time.

JEOI N PT K 2010 183 additional information Imprint

I mprint

E ditor JEOI N PT K AG, Public Relations, 07739 Jena

La yout Hilger & Boie Design, Wiesbaden

P rint Druckhaus Gera GmbH, Gera

I mages Corbis (p. 23), Fotolia (p. 24, p. 25), Getty Images (p. 20 / 21, p. 22 / 23, p. 24 / 25, p. 28 / 29), Hilger & Boie Design (p. 20, p. 26 / 27, p. 28), iStockphoto (p. 20, p. 22, p. 24, p. 25, p. 26), medicalpicture (p. 20), panthermedia (p. 26), picture alliance (p. 28), plainpicture (Titel), Torsten Proß (p. 2), additional pictures: JENOPTIK AG

The contents of this publication address men and women equally. For better readibility, the masculine forms are used normally.

In case of differences of opinion the German text shall prevail.

184 JEOI N PT K 2010 DATES 2011 INVESTOR RELATIONS

MARCH 24, 2011 Katrin Fleischer Publication of the Phone + 49 3641 65-2290 Annual Report 2010 Fax + 49 3641 65-2804 E-mail: [email protected] MAY 13, 2011 Publication of the Interim Report 1st quarter 2011 PUBLIC RELATIONS

JUNE 8, 2011 Katrin Lauterbach General Meeting of JENOPTIK AG 2011 Phone + 49 3641 65-2255 Fax + 49 3641 65-2484 MAY 13, 2011 E-mail: [email protected] Publication of the Semi Annual Report 2011

www.jenoptik.com NOVEMBER 9, 2011 Publication of the Interim Report 3rd quarter 2011